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Old 04-21-2011, 09:47 PM
 
167 posts, read 442,452 times
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Quote:
Originally Posted by VT Hokie 2007 View Post
jmark, it depends on how one defines bubble bursting, which is the point that I was making. There will be no rapid, terrifying drop in home prices that destroys people's livelihood. And, btw, they've been predicting a real estate bubble burst for 50 years and that has yet to happen. I work in the real estate industry (appraisal) and I would bet you $1 million that Washington, DC home prices remain stable (slight decline-to-slight increase) over the next few years and nobody except the big development companies will be hurt. The bubble is not bursting.

But it all depends--does one believe the "bubble bursting" is a decline in prices, a stabilization of prices, or a collapse in the industry? In the industry I work in, the term defines collapse. And I will tell you from the groud floor, my appraisals aren't in collapse by any stretch.

I will say though that I recommend renting for people right now. Home prices are way out-of-whack with rental rates. But that's just the nature of big metropolitan areas--the secret is to buy when the difference between buying and renting is smaller.
Where's my million dollar?
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Old 04-23-2011, 06:33 AM
 
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Five years later, and people still don't want to understand what happened. The real estate market was not the cause of the Great Recession. It was another victim.

Housing prices responded just as they should have in 2002-06. Remember that the average mortgage held in the summer of 2000 carried an interest rate of nearly 8.5%. National average rates for 30-year fixed originations hit 7% in the Spring of 2002 and 6% by that Fall. They were down to 5.25% by the Spring of 2003. The monthly P&I on a $400K mortgage at 8.5% is $3076. At 5.25%, it's $2209. Almost everyone holding a mortgage should have refinanced somewhere in or around that time frame, and of course, many did. At the same time, if you could afford $3000 a month at 8.5%, you could also afford $3000 a month at 5.25%, but instead of a $400K home, you could afford one worth $550K. Suddenly, people were playing with house money, so of course buyers were going to bid prices up. Low interest rates cause the prices of all long-term assets to increase. But in mid-2004, the trend reversed. Rates were back up to 6.75% by the summer of 2006, and the market had cooled. Exactly what it should have done.

No recession resulted from any of that. What did bring about a recession was the crummy loans that unregulated brokers and private label securitizers created and dumped into credit markets along the way. Teamed with phony property appraisers and incompetent bond-rating agencies, those folks churned out large volumes of high-cost, high-profit credit that was too weak to withstand an increase in interest rates. By 2006, the handiwork of these privateers began to fail at rates beyond system tolerances for defaults. Major international credit institutions were forced to write down assets tens of billions of dollars at a time. Bad paper had the potential to be everywhere and in an opaque system, no one could tell for sure where it would pop up next, so no one trusted anyone else and credit flows came close to ceasing altogether. Without access to credit, particularly small and medium-sized businesses laid people off or simply closed their doors. Jobs began to vanish and many more mortgages therefore defaulted, and we were off on the credit-driven downward spiral that led to the 2008 collapse of asset markets and the worst economic debacle in 75 years.

Not because people refinanced. Not because they took out home equity loans. Not because they bid home prices up. Because a bunch of cowboy capitalists knowingly poisoned the credit-market well for the simple sake of lining their own pockets with fabulous profits and huge bonuses. That's where all this came from.

As for kudos in hindsight to long ago posters in this thread, the gloom-and-doom crew got it wrong again as usual. As a whole, the region was among the last-in and first-out examples from around the country. Volume certainly fell here, but prices ran around in the slight increase/slight decrease range that saner voices had foreseen.
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Old 04-23-2011, 09:59 AM
 
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Quote:
Originally Posted by saganista View Post
As for kudos in hindsight to long ago posters in this thread, the gloom-and-doom crew got it wrong again as usual. As a whole, the region was among the last-in and first-out examples from around the country. Volume certainly fell here, but prices ran around in the slight increase/slight decrease range that saner voices had foreseen.
Prices across the region fell 30% after most of the posts in this thread were written in Sept 2006 and are still 23% lower than they were back then. I certainly wouldn't call that the "slight increase/slight decrease range".
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Old 04-23-2011, 11:07 AM
 
1,759 posts, read 1,750,418 times
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Quote:
Originally Posted by saganista View Post
Not because people refinanced. Not because they took out home equity loans. Not because they bid home prices up. Because a bunch of cowboy capitalists knowingly poisoned the credit-market well for the simple sake of lining their own pockets with fabulous profits and huge bonuses. That's where all this came from.
I blame banks that lent insane amounts of money to people who couldn't pony it up,
but I also blame the adults who knew they couldn't afford these places but jumped in anyway.

Equally at fault.
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Old 04-23-2011, 11:47 AM
 
2,879 posts, read 6,819,490 times
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But Franklin Raines met his numbers and got his bonuses. Business & Technology | Franklin Raines to pay $24.7 million to settle Fannie Mae lawsuit | Seattle Times Newspaper
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Old 04-23-2011, 04:21 PM
 
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Originally Posted by shamrock847 View Post
Prices across the region fell 30% after most of the posts in this thread were written in Sept 2006 and are still 23% lower than they were back then. I certainly wouldn't call that the "slight increase/slight decrease range".
Hmmm. According to sales databases of the Fairfax County Department of Tax Administration, your numbers would be off by a factor of at least two. Median new home sales prices in the county meanwhile continued to rise strongly through 2007.
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Old 04-23-2011, 04:48 PM
 
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Quote:
Originally Posted by Alltheusernamesaretaken View Post
I blame banks that lent insane amounts of money to people who couldn't pony it up, but I also blame the adults who knew they couldn't afford these places but jumped in anyway. Equally at fault.
Banks increasingly were not doing the underwriting. That was being outsourced to affiliated and unaffiliated brokers who then off-loaded the paper via the private-label securitization shops that Wall Street had mushroomed into existence. While behemoths such as Countrywide, Ameriquest, and New Century Financial may have had their feet in traditional lending markets as well, they were making it hand over fist by pushing essentially predatory notes into financially unsophisticated moderate- and low-income communities in particular. Sign here...nothing can go wrong. And if it does, you can always refinance. The same lie was still being told long after the market had faltered. The feds of course are supposed to rein in credit market abuses, with the Fed having had full power over subprime markets since 1994. But they never did anything but stand by and watch it all fall apart. Too bad.
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Old 04-23-2011, 04:52 PM
 
19,183 posts, read 28,313,751 times
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Quote:
Originally Posted by khuntrevor View Post
Franklin Raines may or may not have pressured accountants to state income such that he and a few others received larger bonuses than they otherwise would have. This had absolutely nothing to do with the credit crisis and ensuing Great Recession.
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Old 04-23-2011, 08:30 PM
 
504 posts, read 651,017 times
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Quote:
Originally Posted by saganista View Post
Hmmm. According to sales databases of the Fairfax County Department of Tax Administration, your numbers would be off by a factor of at least two. Median new home sales prices in the county meanwhile continued to rise strongly through 2007.
My numbers showing prices across the region fell 30% after most of the posts in this thread were written in Sept 2006 and are still 23% lower came from the case-shiller index for the DC metro area, which measures repeat sales of properties and is widely considered to be the leading measurement of real estate pricing trends.

I couldn't find where your numbers came from on Fairfax county's website, but I have a question about those numbers. Do they measure repeat sales of the same property or just median market values or sales prices? If we are not measuring sales of the same property, we could be comparing apples to oranges due to changes in the mix of property sold.

Median new home sales prices are not really a good measure, since they may have risen due to later homes being larger or having more amenities than earlier homes, in other words, they are not necessarily measuring comparable properties. Furthermore, many of the new home sales through 2007 likely went under contract in 2006 at the height of the bubble, due to the lead time involved in new construction, especially then when people would buy pre-construction and then try to flip it as soon as it was finished. So this is not a particularly valid measurement.

Even assuming your numbers are correct for Fairfax County, that's still not a "slight increase/slight decrease range". It's undeniable the real estate market across northern VA took a pretty severe beating from '06 to '09, although it was certainly worse in some areas than in others.
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Old 04-24-2011, 07:46 AM
 
19,183 posts, read 28,313,751 times
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Quote:
Originally Posted by shamrock847 View Post
My numbers showing prices across the region fell 30% after most of the posts in this thread were written in Sept 2006 and are still 23% lower came from the case-shiller index for the DC metro area, which measures repeat sales of properties and is widely considered to be the leading measurement of real estate pricing trends.
The Case-Shiller Index is a proprietary product of Fiserv and Standard & Poor's which has been pushed to mass-media outlets as being the standard index. In a technical or scholarly sense, it is deeply flawed and has often been an outlier against other major benchmark indices such as those of FHFA, Realogy, the National Association of Realtors, CoreLogic, and Integrated Asset Services.

Quote:
Originally Posted by shamrock847 View Post
I couldn't find where your numbers came from on Fairfax county's website...
As indicated, the data are from the databases of the Country's Department of Tax Administration. These are summarized monthly in the publication Economic Indicators. Click Demographics & Data from the County homepage.

Quote:
Originally Posted by shamrock847 View Post
...but I have a question about those numbers. Do they measure repeat sales of the same property or just median market values or sales prices? If we are not measuring sales of the same property, we could be comparing apples to oranges due to changes in the mix of property sold.
The data are the median by type for all monthly sales in the county. Repeat-sales methodologies are typically impractical at such as county or zip-code levels because of the large fraction of transactions that must be definitionally excluded. The data are indeed therefore susceptible to any significant change in property mix. This would be a particularly relevant concern with respect to new home sales, where volume fell by more than 50% between 2006 and 2009. The market for existing homes is not so prone to such distortion, being some ten times larger to begin with and having declined in volume by just 10-15% over the same period.

Quote:
Originally Posted by shamrock847 View Post
Even assuming your numbers are correct for Fairfax County, that's still not a "slight increase/slight decrease range". It's undeniable the real estate market across northern VA took a pretty severe beating from '06 to '09, although it was certainly worse in some areas than in others.
In order to preserve an acceptable sample size after definitional exclusions, the Case-Shiller data cited included sales for the entire DC SMSA. This is the Northern Virginia subforum. It is doubtful that posters here were thinking about prospects for PG County when assessing the future of the area. As noted, the local effects were less than half as severe as those for the SMSA as a whole. In general, NoVa was an example of last-in/first-out when it came to the housing crunch, and the declines that did occur were mild by both national and regional standards. Prognosticators of local doom missed the mark again.
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