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Treasury's new job: "Protect home values" | L.A. Land | Los Angeles Times (http://latimesblogs.latimes.com/laland/2008/10/treasurys-new-j.html - broken link)
Stupid beyond belief. Home values during the bubble were imaginary to begin with, and should continue to fall until local areas are on par with income.
Stupid beyond belief. Home values during the bubble were imaginary to begin with, and should continue to fall until local areas are on par with income.
Again,
Another blanket statement like the many others given throughout this forum. Home values were NOT at imaginalry levels during the "bubble" that most areas in the US did not see. Now all of a sudden, the fact that there have been ALL price ranges in real estate history, from very affordable in a town home or small single family to multi-million dollar homes, that ratio is just to be wiped off the planet? So what price point do you pick to be "slashed" so that all homes can be affordable or to "par" with AVERAGE incomes? Just curious. No, consumers need to buy homes they can afford and that's why there is a choice of homes at ANY and ALL price ranges. Granted, they are not going to get that 1/2 mil home for what 250,000 buys but if 250,000 is the price range they should be shoping in, then that's where they should be shopping! PLENTY of choices. Problem is, most want much, much more, unrealistically, for their money and think they are "intitled" to it because "housing is not affordable" to them. This is NOT the way it works folks.
PS. I did notice the artical, once again, pertains to California. At least when you make a post you should point out that you are not making this type of statement for the rest of the U.S. I think all of us that live anywhere but CA know YOUR prices were "imaginary" and why CA needs a different plan than the rest of the nation! But please, stop generalizing!
So with home prices of $1 in Detroit, they should continue to fall until people are being paid to take the homes? That might actually be on par with the local income because so many people are on welfare.
What is the "real" value of real estate? You do not really own it. You cannot take it anywhere. You only own certain rights given to you by the government. Arguably, it has no value whatsoever.
One of the biggest problems that I see is that home values have fallen below the cost of building a home. Even if labor prices fall, the cost of materials will not. If we cannot afford the materials, China will buy them.
So with home prices of $1 in Detroit, they should continue to fall until people are being paid to take the homes? That might actually be on par with the local income because so many people are on welfare.
What is the "real" value of real estate? You do not really own it. You cannot take it anywhere. You only own certain rights given to you by the government. Arguably, it has no value whatsoever.
One of the biggest problems that I see is that home values have fallen below the cost of building a home. Even if labor prices fall, the cost of materials will not. If we cannot afford the materials, China will buy them.
I have been predicting for a couple of years that gubmint will offer some distressed properties for little or nothing to homesteaders.
We are headed there...
I can't speak for any other market than the one I'm in, here we have new and nearly new houses on the market for prices well below the cost to build. Mark the land value to zero, forget the costs to connect to utilities, forget the lot prep, forget the impact fees. You can't build the basic house for the current offer price!
As long as these properties are available in any quantity no one will build new.
That means that many families will have a reduced income, yeah many people depend on new construction for income. So we have a catch-22 here. We need to stabilize the housing market, get the vacant inventory sold, so we can get back to normal. The current housing market is dysfunctional, just as dysfunctional as the boom market.
I'm not in favor of this bailout/recovery package, because it does not appear to be targeted at the root of the problem, the housing market and the inflationary aspect of the increase in energy prices. It is intended to help the banking system, which in turn will allow a more normal lending environment, but for some reason banks stopped lending to people who don't have jobs.
The stagnant housing market has gotten to a point where it threatens to bring the banking industry down so the bailout/recovery package is probably necessary just to buy time.
How to stabilize the housing market is truly the tough question. I've heard some people suggest that rewriting the mortgages for those that are in foreclosure, I'm afraid that if that approach is taken that my wife will stop paying our mortgage so we can get in line . I've been hoping that quality investors would step in and start buying the bank owned property, but I haven't seen that occurring in any volume.
I've been hoping that the feds would do something like offer a capital gain tax write off for investors that purchased single family homes, and kept them rented for some number of years (say 5). It's my belief that investors would start looking at the bargains that are out there, and once the volume of sales picked up then the retail buyer would return. Then the MBSs would be able to be priced. This type of approach would not cost the tax payer, or increase the national debt. It's just not PC.
NOTHING can stop home prices from falling in real (inflation adjusted) terms. Not a billion, trillion or quadrillion dollars from our benevolent gubmint.
The problem with trying to "stablize" prices at an artificially high level is it can't be done in our economy. Prices will eventually stablize (they won't go down to zero) but it may be a level that the current homeowners don't want to accept.
But the long term picture is housing cannot be overly expensive compared to incomes because you have more (potential) first time homebuyers in the market everyday. Right now, a person can't buy a house with one or two incomes in many markets, so the housing market is only open to people trading up and not open to first time homebuyers.
Phoneix was a classic example of this. I watched a particular house (new construction) sell for $208k in 2004 and the same house resold for $495k in 2005. But incomes didn't budge and the incomes in Phoenix generally didn't support 500k houses. In 2006 and 2007, the investors packed up and left and none of the people actually living in Phoenix could afford the homes, so prices had to come back down.
As long as these properties are available in any quantity no one will build new.
Excellent! That's what we need. Also the construction works will have to take a pay cut.
Quote:
Originally Posted by FLBob
That means that many families will have a reduced income, yeah many people depend on new construction for income. So we have a catch-22 here. We need to stabilize the housing market, get the vacant inventory sold, so we can get back to normal. The current housing market is dysfunctional, just as dysfunctional as the boom market.
It's amazing how many people I know that are involved in real estate, housing, or construction. Probably nearly half of my high school classmates (ten years later) have their fingers in it in some way.
But that's the problem - it is a catch-22. The only to break the cycle is to get some of real-estate related people into other industries, which is happening right now. [/quote]
Quote:
Originally Posted by FLBob
It is intended to help the banking system, which in turn will allow a more normal lending environment, but for some reason banks stopped lending to people who don't have jobs.
Good! I'm glad they stopped lending to people without jobs.
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. I've been hoping that quality investors would step in and start buying the bank owned property, but I haven't seen that occurring in any volume.
