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Do the math and you can see that it is not just people who bought with no downpayment or people who have owned a home for only one two years are needing to bring a check to closing.....
If you do the math, a seller who has lost 25% of value in a home will have to bring a check to the closing table even when they put 20% down and have lived in the house for 5 years...
For example, if you buy a $250,000 house in 2003 and put down 20% resulting in a mortgage of 200,000. You don't pay down much principle in the first years, so you don't gain much there - maybe $10,000 of equity. Let's say you gained 5% before before the market fell giving you $262500 in value. Then comes the 25% loss ($65,625 in loss of value).
So at the closing table the mortgage is approximately $190,000, but I basically sold my house for that after the 25% loss which means I sold for about $190,000. Then you add the 6% commission of $11,400 plus the $3000 in closing costs and maybe $2000 for buyers incentives and you are needing a $16,400 check to sell your home.
I personally think that everyone should take responsibility for their own financial decisions, but I think that some people think this can't happen to someone who buys a house "the right way" and unfortunately it can and is... You don't have to have made foolish money decisions to end up bringing a check to the closing table these days.
I am so sick of Yun and the NAR saying RE is local. Gaylord and Yun are saying real estate will remain soft for remainder of 2008 and then local for a recovery in 2009. I am not buying it.
Yes, location is the most important factor in buying a home but there are other factors as well such as availability of credit to buyers, overall economic news, unemployment and labor market conditions, interest rates, etc..
I am so sick of Yun and the NAR saying RE is local. Gaylord and Yun are saying real estate will remain soft for remainder of 2008 and then local for a recovery in 2009. I am not buying it.
Yes, location is the most important factor in buying a home but there are other factors as well such as availability of credit to buyers, overall economic news, unemployment and labor market conditions, interest rates, etc..
We are still not at bottom.
Right on!! It's a NATIONWIDE RE crash. Get over it all you people in denial!
I share this feeling. There was a prediction in one of the financial magazines for my local market made about 2 (2+) years ago that Tucson will bottom out 4th quarter '08. Guess I was a little more optimistic and didn't believe it, so I bought a house 7 months ago. Based on the current conditions I believe this prediction was correct.
Do the math and you can see that it is not just people who bought with no downpayment or people who have owned a home for only one two years are needing to bring a check to closing.....
If you do the math, a seller who has lost 25% of value in a home will have to bring a check to the closing table even when they put 20% down and have lived in the house for 5 years...
For example, if you buy a $250,000 house in 2003 and put down 20% resulting in a mortgage of 200,000. You don't pay down much principle in the first years, so you don't gain much there - maybe $10,000 of equity. Let's say you gained 5% before before the market fell giving you $262500 in value. Then comes the 25% loss ($65,625 in loss of value).
So at the closing table the mortgage is approximately $190,000, but I basically sold my house for that after the 25% loss which means I sold for about $190,000. Then you add the 6% commission of $11,400 plus the $3000 in closing costs and maybe $2000 for buyers incentives and you are needing a $16,400 check to sell your home.
I personally think that everyone should take responsibility for their own financial decisions, but I think that some people think this can't happen to someone who buys a house "the right way" and unfortunately it can and is... You don't have to have made foolish money decisions to end up bringing a check to the closing table these days.
if you had lived in some of the florida, california, nevada or arizona hotspots your $250 000 intitial price would've been $300k the next year, $360 the next, $435 and the to $520 000 in 2007. then you have to take off the 25% that prices have come off which would come to around $395. so it is my opinion that if you've lived in a house for 5 years then the crash hasn't eroded all of your equity yet. but it will imo. if however you bought at the peak 2 years ago then you're in bigger trouble
I can't reveal my sources, but RE prices should be heading back up this spring
Hope so, but until foreclosure rates slow and stabilize, and banks have money to loan to buyers, I'm not as optimistic. The $700B coverup for the congressional rump swabs of Fannie and Freddie will hopefully help a little, but no guarantees.
If the government doesn't get us back to a point where we only lend money to people who can afford to pay it back, again require skin in the game via a downpayment, do away with piggyback loans and reinstate PMI requirements, then all the bailouts in the world will be useless and the market will never fully recover.
One other implication is the fact that once the economy starts to recover and the treasury printing presses start pumping out the Benjamins to cover all the new commitments, inflation will rise, so your house may appreciate in absolute dollars.
Since the report is 12 pages long...
just a little outtake, since I believe the OP is from Florida:
Top 10 risky RE markets, and the percent chance that home prices in each will be lower in two years than they are now, as taken from mortgage insurer PMI's just released quarterly rankings of the 50 big US housing markets.
1. Fort Lauderdale, FL 99.5% chance
2. Inland Empire, CA 99.5%
3. Orlando, FL 99.4%
4. Miami, FL 99.3%
5. Tampa, FL 99%
6. Las Vegas, NV 98.5%
7. Los Angeles, CA 98.5%
8. Orange County, CA 97.7%
9. Jacksonville, FL 97.5%
10. Phoenix, AZ 96.3%
Yep, things are looking really rosey for FL.
Don't feel bad though OP. I live in one of these markets, and I've lost count of how many RE agents that have told me we've already hit bottom and prices are already on the upswing.
People are still buying here though. Doesn't make much sense to me, but apparently I'm more risk averse when it comes to my money than some folks.
I can't reveal my sources, but RE prices should be heading back up this spring
3 bedroom, 1500 foot houses are already unaffordable for much of the middle class and working class. I sure hope they don't head back up.
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We are still not at bottom
