Spring Market? What Spring Market? (Hillsdale: real estate market, mover, credit card)

[Lusitan]

Originally Posted by JG183

pray tell, what do you think was the root cause of the increase in housing prices ?

Low interest rates courtesy of Mr. Greenspan caused investors (in large part, international investors) to look around for somewhere they could get a higher rate of return.

The federal government's quasi-backing of supposedly "private" Fannie Mae, plus the historic relative safety of mortgage investments (back when house prices were sane and people were forced to be responsible, default was relatively rare), made investing in mortgage lending attractive.

Demand for investing in mortgage loans increased. To meet demand, mortgage brokers and banks kept trying to churn out as many mortgages as possible to sell to investors. After all of the qualified buyers were taken, there was still demand by investors to buy up more mortgage loans, so lenders starting coming up with kooky ways to suddenly turn unqualified buyers into "qualified" buyers, in order to keep selling more mortgages.

Add in that the government's refusal to regulate Fannie Mae (because many in Congress were happy to see so many from their voting block magically able to "afford" houses) and some creative accounting and securitization of mortgage debt, variable rate mortgages with low initial rates for 3 years or so, no money down and other goofy financing schemes, and pretty soon you've got a sea of money out there sloshing around, most of it in the hands of unqualified buyers who were pre-approved for loans they could never afford under traditional guidelines.

Those magically "pre-approved" buyers took that money the lenders offered and went on a massive buying spree, bidding up the price of housing far beyond what the underlying value analysis dicated they were worth. When you have so much easy money chasing the same amount of housing stock, price escalation is unavoidable.

With house prices skyrocketing due to the easy money being tossed around, more people started getting in on the game. Mortages were just as easy for flippers and "investors" to get, so they added speculative fuel to the already bubbly housing market, driving prices up further. These buyers never intended to hold the property longer than the short while necessary to find some bigger fool to sell to in the ponzi scheme.

Fast forward a few years, and now we see that the emperor has no clothes. The "qualified" buyers were, in fact, not qualified. They cannot (and never could, under any sane analysis) afford the mortgage loans they were given. So much money was given to these fools (in the way of mortgage loans) that the entire banking system came crashing down when people realized how inflated house prices had become. And now we're on a downward spiral where the whole thing is unraveling; and we're only in the early innings.

All that wouldn't necessarily be unsual or necessarily bad -- in a capital market, foolish people are supposed to be separated from their assets, whether it be investors who foolishly lent their money to unqualified buyers, or "buyers" who are living in houses they can't afford and should be foreclosed upon. The ugly part of the story is now the government is taking money from the general public -- from people who had no part in any of this debacle -- to pay for the mistakes of others.

[sholden]

Originally Posted by JG183

history has seen so many changes, that the data/formulas you love to quote are meaningless today.

the economy was much "smaller" in all of the times pre-1996.

once the Internet and information revolution hit, the landscape changed, and there were literally hundreds of new fields of employment that didn't exist before.

with the addition of all those opportunities, wealth expanded, and subsequently the cost of housing (and education and services and...) went up.

The economy is heading back to being smaller than 1996, so what does that do house prices according to your theories on "the internet drove up house prices"?

*ALL* of America's economic "growth" (as measured by GDP) in the last decade has been due to consumers buying stuff on credit (whether on credit cards, or on a HELOC), investors investing on credit, and inflation numbers being lower than reality due to "accounting tricks".

All of that "growth" is in the process of being revealed as non-existent as bubble after bubble implodes.

[MoorestownResident]

Originally Posted by NatasNJ

I have been told this is the time of year that majority of houses come up for sale and so far there has been little to no action so far. How is everyone else seeing the new listing crop play out? In South Jersey it seems to be the tired old listings from last Fall & Winter. Half those listings have been taken off the market and a some have sold. The issue is there are very few NEW listings and it is making me insane.

Inventory levels were higher in South Jersey in Spring/Summer months of 2007 and 2008. Honestly, the lack of new inventory is a sign you waited too long. The optimal time to buy is when inventory is plentiful in your price range in a deep buyers market. If you wait too long for the best price, the inventory dries up, you either take what's left or pay more later for something you really want.

[ghuber]

Originally Posted by Marc Paolella

They never were. They never are.

Housing has never been affordable. Not even in the 1950's in the Golden Age when your father worked part time for the newspaper and raised a family in a nice 3 BR home with chocolate chip cookies and apple pie. It's all a myth.

Housing will never be affordable. Owning nice real estate will always cost talent and hard work. There is no right to it. It is a privilege reserved for those who make it a goal and force it to happen.

And that is how it should be.

Marc,

Though I have much respect for you and have found your posts largely telling of the times and the state of real estate as a whole, this one screamed "I'm a realtor!"

Lets take the past 10 years am exaple housing... In 2000, 2001, 2002 and 2003 houses were far more reasonably priced. I could buy a *really* nice house for 350k back then. That same house now (after the depreciation caused by falling home values) is still listed at 550k-650k by many sellers in NJ. Can you say ridiculous?

Then lets examine NJ property taxes.. In many areas they're on an unstoppable, rapid acceleration forward. In 2003 you might have paid 7k, now they might cost you 10k as NJ jacks them up because the state is totally broke.

Now lets examine NJ salaries... In 2000 (er maybe 2002-2003) you might have made 50k/yr. That money when combined with comparable income from a spouse could comfortablely buy you a 350k house. If you received a 4% raise each year since 2000 you'd now be making roughly 70k in 2009. So your income has only grown by 20k/yr (maybe 40k/yr including a spouse), but that same house will now cost you 200-300k more.

The equation is imbalanced. Now is not a good time to buy. Don't even bother to argue about the low interest rates because all those people who bought back in 2000-2003 have probably now refi'ed and hold an interest rate of 5-5.5% on their mortgages (Remember the house they paid just 350k for). They might have had it rough for a few years (When their interest rate was.. 6-7%), but now they have a sweet deal. Too bad that deal isn't going to happen for anyone that buys a house today. They're going purchase a home at an inflated price that is probably only going to depreciate for the next 5 years, at which time the price will level off. Then 5 years after that their home value will actually start to appreciate and income catches up to value. Oh and when they need to bring their monthly payment down, how are they going to accomplish that? Refi? Nope, don't think so they already were given a rock bottom rate just so they could afford to purchase a home at an inflated home value. Guess they're screwed if they don't start making some more money!

Now I'm not saying that every house is a bad deal nor am I saying it isn't a good time for some people to buy... I'm simply saying that as a whole, the market, the economy and the conditions are not advantageous for the majority of us to buy. Sitting on the sidelines and watching the carnage is a much better idea if you *don't* absolutely need to buy something right now. The homebuyer tax credit may get bigger (15,000k), interest rates are said to be going lower (4-4.5%), and there is simply no doubt housing prices are going to continue to decline (9-15%).

[Marc Paolella]

Originally Posted by halfoffpeak

Oh we did leave the best and brightest alone and free to act as they pleased.
And they achieved greatness.
The GREATEST BUBBLE EVER!

The government caused the bubble. As it causes all bubbles. Government involvement in every aspect of the financial system from the banks to the stock market to real estate. It is incorrect on your part to attribute the problems that surround us to the movers and shakers in society. We would not have a society were it not for the best and brightest among us. I think they are under-appreciated at best.

Now, in the name of protecting us, we have a government that is printing money like there is no tomorrow. And we might well wish for no tomorrow when the engine of inflation starts and achieves orbital velocity.

Pay down those credit cards while you still can kiddies. This move to the left that y'all voted for, a headlong move towards statism, collectivism, socialism, and altruism, will bankrupt this country in ways no one can even imagine yet. 20% mortgages and Jimmy Carter misery indexes are just around the corner. I can't say I will feel sorry for you: y'all asked for it. Homecoming chickens coming up!

[halfoffpeak]

Originally Posted by MoorestownResident

Inventory levels were higher in South Jersey in Spring/Summer months of 2007 and 2008. Honestly, the lack of new inventory is a sign you waited too long.

Not at all. This is a sign that one needs to wait more. Don't pay attention to inventory but rather to absorption rate (ratio of inventory over sales).

[MoorestownResident]

That's fine but in South Jersey the market bottomed in 2008.

[ghuber]

Originally Posted by MoorestownResident

That's fine but in South Jersey the market bottomed in 2008.

lol

[halfoffpeak]

Originally Posted by Marc Paolella

It is incorrect on your part to attribute the problems that surround us to the movers and shakers in society. We would not have a society were it not for the best and brightest among us. I think they are under-appreciated at best.

Movers and shakers, best and brightest are very well appreciated, thank you very much. They are still making money and have the rest of us bailing them out with our money.

In a bubble, the best and brightest keep the money and the worst and dimmest, that is us, get the short end of the stick.

But you know what is the saddest thing to see? That the dimmest remain dimmest and still believe that the best and brightest look after them.

[mumra]

Originally Posted by halfoffpeak

In a bubble, the best and brightest keep the money and the worst and dimmest, that is us, get the short end of the stick.

Are you sure about that? How about the people that bought a house that they couldn't afford and are getting bailed-out, they aren’t getting shafted.