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Old 12-20-2007, 07:38 PM
 
19,183 posts, read 28,320,304 times
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Quote:
Originally Posted by mojo_1979 View Post
Prices are falling and nobody wants to catch the falling knife. People are asking themselves, "if I buy now will my house be $50k cheaper next year?"
Maybe they should also ask themselves whether if they do wait a year and the price does come down by $50K, will they still be able to beat out the ten other buyers who will appear out of the woodwork from the stock of pent-up demand that the current slump is building.

Quote:
Originally Posted by mojo_1979 View Post
Not to mention that a recession is MOST definitely in the cards for 2008. Of course you won't hear the media talk about this on television until after the fact (hey wait.. just like there was no bubble until there was one... hmmm).
Are you kidding??? That's all they ARE talking about. Recession, recesssion, recession! If the talking heads drove the economy, it would be 1932 all over again right now. As for bubbles, it seems like a lot of folks have taken to applying that word to any advancing market that eventually weakens. Markets go up, and markets go down. This is what they do. People should try getting used to that?
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Old 12-20-2007, 07:42 PM
 
280 posts, read 968,902 times
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yes, very true folks. The talk of the bubble, housing crash, and recession are now news news news. I don't hear much else but that and the election (and war).

several economists were saying that they will not be worried about a major recession until they start seeing huge increases in unemployment numbers. I'm in HR and I can tell you - companies are still growing and they are still hiring, more than ever.
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Old 12-20-2007, 07:47 PM
 
19,183 posts, read 28,320,304 times
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Quote:
Originally Posted by Novamom06 View Post
Sorry, I for one think that the Dulles corridor is pretty close to bottom. I believe that as soon as the jumbo rates drop we should be out of the woods. The area is still growing - they are building a World Trade Center off Rt 7 by Rt 28 and businesses will start moving in in two years. The Loudoun County Supervisors just squashed a huge development that was planned for Leesburg with thousands of homes. Another one was squashed for west of South Riding. The incoming Board of Supervisors is VERY slow growth (housing growth). Notice all the posters on this board relocating to the area? It is a vibrant area with high paying jobs.
Those are all very salient points.

Quote:
Originally Posted by Novamom06 View Post
I think the jobs are continuing to come, the county is halting the aggressive home building, and I think this spring is going to be an interesting market...if the interest rates drop.
The Fed would like to cut interest rates, and they may. But they are boxed in a bit by the continuing need to sell enough debt to finance the large budget and trade deficits that we've been running. In a sense they have one hand tied behind their backs, sort of loosely at least...
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Old 12-20-2007, 08:00 PM
 
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Quote:
Originally Posted by claude henry smoot View Post
Good point - but I checked historical interest rates for reference... http://www.mortgage-x.com/general/historical_rates.asp And while I agree lower interest rates really helped inflate everything and lay the foundation for the bubble, rates during some of the biggest annual price increases held relatively steady. For example, as prices increased 22% in 2004 and 24% in 2005, 30 year fixed interest rates held pretty steady, bouncing between ~5.5% and ~6.3%.
And what were they five to seven years earlier? 8.0%? 8.5%? For the same amount of P&I money that you shell out monthly for a $500K house at 8.5% you can own a $715K house at 5.0%. And keep in mind that for a few weeks at the bottom, you could get a conforming 30-year fixed at 4.50%.

Quote:
Originally Posted by claude henry smoot View Post
So in my opinion, interest rates played a big role in this mess, but prices never should have increased by 46% over 2 years while interest rates and income remained pretty much flat.
Rates did not remain flat. Declines in interest rates played a signficant role in sending prices up as homeowners realized that they could trade up sooner than they had thought, or in many cases, as they realized that they had a window of opportunity at last to buy a home in a school district that would provide their kids with the best education around. And then there's the general rule that prices of all long-term assets rise as interest rates fall...and, of course, vice versa...
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Old 12-20-2007, 08:04 PM
 
19,183 posts, read 28,320,304 times
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Quote:
Originally Posted by sheri257 View Post
I certainly agree with this. In many cases, the exact opposite of what the media says is true ... So ... when the media says the sky is falling and everything is absolutely horrible ... that's probably when we'll know we've reached bottom ... both with housing and stocks. And ... that's when I'll start buying again.
Just to note that there are various contrarian mutual funds out there that anyone can invest in. But on the historical record, they haven't done so well as to shine like any sort of bright light...
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Old 12-21-2007, 05:15 AM
 
1,831 posts, read 4,788,482 times
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Quote:
Originally Posted by saganista View Post
I don't think the problem is with the numbers. It's just very simplistic to assume that there's any deterministic realtionship between median income and median home prices.
I agree that there are many other factors involved but ...

Those higher prices were driven by debt which had no relationship to incomes. Hence people could not pay the debt back, creating a massive credit crunch which then caused prices to drop like a rock.

So, incomes (or, rather, the lack of incomes) has been a big part of it.
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Old 12-21-2007, 09:03 AM
 
523 posts, read 1,289,690 times
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Quote:
Originally Posted by goldenmom7500 View Post
And again, interest rates are also falling, and are presumed to decline further (along with the perception that prices will fall), so buying right now, at this exact moment, probably doesn't seem like a great idea to a lot of people.
Interest rates are going to fall? Really? Do you realize our interest rates are still near 40-year lows? Check out the chart on the link below. The FED can lower the prime rate all it wants but it won't necesarily lower mortgage rates. In fact, with inflation picking up, mortgage rates will be going UP not down.

http://www.thompsonsrealty.com/Mortgage_Rate_History/page_1708965.html (broken link)
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Old 12-21-2007, 10:37 AM
 
1,831 posts, read 4,788,482 times
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Quote:
Originally Posted by mojo_1979 View Post
In fact, with inflation picking up, mortgage rates will be going UP not down.
Yeah ... they've really created a mess this time ...

If they raise rates they worsen the credit crunch ... hurting the economy.

If they don't raise rates, we get inflation ... hurting the economy.

Either way ... we're screwed. Seems like these prolonged lower interest rates have created a huge problem.
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Old 12-21-2007, 11:37 AM
 
Location: Richmond, VA
2,306 posts, read 1,354,435 times
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Jumping in here...Interest Rates for mortgages just went up-we called a few weeks ago and they were 5 and 3/4 (we should have locked in) when we did lock in last week they were up to 6 and 1/4 and my husband called to double check the other day and they rose to 6 and 1/2. So...The mortgage person we are dealing with believes they are just going to keep going up and up.
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Old 12-21-2007, 04:57 PM
 
62 posts, read 211,308 times
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Quote:
Originally Posted by saganista View Post
I don't think the problem is with the numbers. It's just very simplistic to assume that there's any deterministic realtionship between median income and median home prices.


It’s simplistic because this issue at its core is not complicated. The data clearly demonstrates what this problem boils down to - affordability. And the relationship between median income and median home prices is not assumed, it's been the norm for over 50 years now.

Quote:
Originally Posted by saganista View Post
Think of the situation where median income remains constant, while population increases faster than the housing stock. What would happen?


In theory, prices would increase – to an extent. But regardless of whatever factor drives home prices upwards – if income does not also increase proportionally, buyers in the market will eventually be unable to keep up. Income is by far the primary factor in one’s ability to purchase a home. If you have no income, you cannot buy a home.

Anyhow, this wasn’t really an issue in Fairfax best I can tell - population in Fairfax County only grew about 7% since 2000. Housing units grew about 8%. Numbers seem pretty decent to me.

Quote:
Originally Posted by saganista View Post
In any case, it is the fact in Fairfax County that even though on declining volume, the median price of new SFH's sold through August increased in 2007 over the same period in either 2005 or 2006, while the median price of an existing SFH was essentially flat across the period.


If you're somehow implying the market in Fairfax County is/will be all sunshine and happiness, then you're going to be in for a rough 2008. Is Fairfax currently showing some resilience? Yes – for good reason – there’s a lot of money here and people want to be here. But as the data shows, there’s not enough money to justify a home price increase of 160% over 7 years. I can gladly go into what caused this bubble, but that’s a completely different thread. The point of this discussion is more along the lines of “where are we?”, as opposed to “what caused us to get here?”.

The outer suburbs are already correcting – they may finish up by the end of 2008. There are currently homes in Manassas selling at 62% off 2005 prices – pretty abnormal mark-down – but an idea of how bad things are out there. It’s only a matter of time before Fairfax home prices take a hit. I’d expect to see things really deflate in the spring.

Quote:
Originally Posted by saganista View Post
It's all well and good to want to get the word out, but we might want to be sure that we understand what the word actually is before we start spreading it...


What's not to understand? Do we need to get an economist with a PhD in here to tell us homes are overpriced and people can’t afford them because they don’t make enough money? Yes, there are dozens of issues that contributed to this problem, but it all eventually comes down to affordability.
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