100% loans are gone...What will this do to San Diego? (home, prices)

[NewToCA]

Originally Posted by justsomeguy

What exactly is being said about the economy on this forum that you consider to be "juvenile nonsense"?

The disaster stuff about California, including comments about unending housing spirals. I agree with the fact that there will be problems, but I have read many comments making it appear all is lost, and it won't be that way at all. This is a shakeout, and some pain will be associated with it, that's it.

Homes will still have substantial value, and with the projected population increase for the next couple of decades, some appreciation will return too.

[socketz]

Originally Posted by austin-steve

Actually, you only gain the incremental writeoff that exceeds your standard deduction.

I think many areas of the US are still inflated with loan froth. That is, the buyers who created the price run-ups would never have existed without the loan products that enabled the purchases.

Now that it's time for many to abandon ship, there are not enough life boats and many owners/homes will continue to go under as there are simply not enough loan products available to sustain a next wave of buyers.

Steve

Excellent point. And without the wealth effect created by home equity over the last 5-7 years, I wonder just how many additional industries will be affected in the downturn.

[socketz]

Originally Posted by NewToCA

The disaster stuff about California, including comments about unending housing spirals. I agree with the fact that there will be problems, but I have read many comments making it appear all is lost, and it won't be that way at all. This is a shakeout, and some pain will be associated with it, that's it.

Homes will still have substantial value, and with the projected population increase for the next couple of decades, some appreciation will return too.

I'm bearish on CA long term, but the adjustment that is happening now is real and will last longer than many think.

[socketz]

Originally Posted by austin-steve

Perhaps the opposite could be said about those who spread sunshine and good cheer in the face of very sobering facts and data. The real estate loan industry is in big trouble and that's having serious consequences for sellers and the buyers they hope to sell to.

Many people should never have purchased the home they now own. Twice the number of ARM interest rate resets will occur in the first quarter of 2008 as in the entire year of 2007. The wave hasn't crested yet. Ignore it if you will.

For a financially sound person with good credit and the intention to live in a home for 10+ years, I don't think it's important to try to "time" a market. Get the best deal you can at any given time and move on.

For buyers on the edge, I don't think zero-down buyers should ever buy a home in any kind of market, ever. That's just my personal opinion.

Steve

What's sobering is over 40% of the loans written in CA in 2006 were IO products. That's a very unhealthy proportion. I love IO loans and think that they have a very good place in a RE portfolio, but they are investor tools, not tools for the average person to buy more than they can afford. A few years ago, it didn't matter.....you buy more than you can afford yes, but it appreciates at 30+ percent per year. Nice way to build equity right. But in a declining market IO loans with zero down are bad news. Rent in CA and buy an investment property in the middle of the country somewhere and write off depreciation.

[UseJeff]

Forgive me if this has already been mentioned... I read the first 15 posts, then skimmed the rest.

100% financing is far from gone, it's just gone for the people with poor credit. There's still 100% financing through FHA loans, or the "MyCommunity 100" program as well. Wanttoteach, you said you have great credit, so you shouldn't have an issue finding this loan. The only concern could be reserves... Typically though 2 - 6 months of PITI (principal, interest, taxes, and insurance) is all you need.

If you have not done so already, be sure and get pre-approved. I don't just mean get the letter from a lender, but actually start the loan process. It's not hard to process an application through the approval process, even if your property address is to be determined.

With rates the way they are now, you may want to look into a fixed product, and all one loan. Previously 80/20's offered lower overall payments, but these days the one loan with mortgage insurance is very competitive.

As far as the market goes, there may be a short term reaction to people taking offers they may not have previously just out of fear. The news has really gone all out talking about the negative that the sub-prime market has created. I personally think house values as a whole will be stagnant for at least another year. Local values are so dependent on economy though, that they won't always follow the national average. There's still areas that are climbing in value, and some areas that have tanked so bad it's silly.

I think you just need to decide if now is the time to buy a house. The main risk is if the housing market will drop some more, or will now start to go up. It's really no different than buying stock. If you buy and it drops, your 20/20 hindsight wishes you had waited. If you don't buy, and the values stay the same, then start to climb...

Just factor in the risk vs. reward. Consider the worst case of a 20% drop in value... how long do you plan to be in the home? I would expect within 7 years tops it would recover any lost value. Realistically, if you buy something under market to start... you shouldn't see anything more than a 10% value drop in the short term.

[shannon94]

[quote=NewToCA;1269274]The vast majority of the economic comments I have read on the California forum are juvenile nonsense. Posting a reasonable perspective, which you have, is fine. However, the vast majority appears to be little more than sour grapes from either folks trying to game the housing market, and losing, or who didn't participate in the price run up and are now rooting for those who did to get burned.



Perhaps some people are sick to their stomachs and are worried about the outcome of this last housing run up and the trickle down effect it will have on the rest of us who didn't bend over and take any loan we could just to get into a home in Cali. Perhaps the people who are painting the real estate market with sunshine are recent buyers who are afraid to lose their *****!!?
(There's my juvenile comment)

I'm familiar with a few of the posters on here and a couple of them actually did quite well in the California run up....doesn't mean they've become blind because of it. Some of us moved away and bought homes elsewhere. (no not living in someone's garage like you mentioned in a previous post.)
Waiting to buy to get a better deal only makes sense!! What's sour grapes about that?

[shannon94]

Originally Posted by socketz

What's sobering is over 40% of the loans written in CA in 2006 were IO products. That's a very unhealthy proportion. I love IO loans and think that they have a very good place in a RE portfolio, but they are investor tools, not tools for the average person to buy more than they can afford. A few years ago, it didn't matter.....you buy more than you can afford yes, but it appreciates at 30+ percent per year. Nice way to build equity right. But in a declining market IO loans with zero down are bad news. Rent in CA and buy an investment property in the middle of the country somewhere and write off depreciation.

Yes!!!!! Sockets yes!!!!!! Thank you for saying that!!

[wanttoteach]

Just factor in the risk vs. reward. Consider the worst case of a 20% drop in value... how long do you plan to be in the home? I would expect within 7 years tops it would recover any lost value. Realistically, if you buy something under market to start... you shouldn't see anything more than a 10% value drop in the short term.[/quote]

Our plan is to continue making lowball offers while the market keeps dropping. That was our thought exactly...if we end up buying something under the market then we won't be losing as much (short term anyway). Whatever home we end up buying, we plan on staying in for a long, long time. My prediction is that the market will continue to fall. So, when and if we find a home that we like we will put a lowball offer on it and hope that someone will see the light. If not, great-that is more time to watch the market drop.

The sellers rejected our counter again, and now we are DONE. We told our agent to tell their agent that we will be back to put another offer on it in December, and we will offer even less. The reality is this: The market will continue to fall over the next few months definitely and the sellers will be kicking themselves. Believe me, that is just what we did. We got 2 horrid offers in December. We laughed at them. We were so offended. Then, 6 months later we ended up accepting an offer that was lower than the previous 2 offers. If we had taken one of those "silly" offers, then we would have had 20k to put down on a house! Our agent says that their agent will probably be calling her back in a few days wondering why we didn't counter...I just can't wait to see their home still for sale in December at a much lower price. (I know, that sounds very evil...I am just very annoyed with the people right now). They had the "value range" that I mentioned before-and they had the nerve to counter at the bottom of their range. Basically they are saying, "I refuse to accept anything under my asking price." Their realtor actually said that they said this. Well, good luck to them...and now we can wait even longer and get even better prices. (Please forgive my rude thoughts towards these poor people who are just trying to earn some money...I am just annoyed right now.)

[NewToCA]

Originally Posted by wanttoteach

Our agent says that their agent will probably be calling her back in a few days wondering why we didn't counter...I just can't wait to see their home still for sale in December at a much lower price. (I know, that sounds very evil...I am just very annoyed with the people right now). They had the "value range" that I mentioned before-and they had the nerve to counter at the bottom of their range. Basically they are saying, "I refuse to accept anything under my asking price." Their realtor actually said that they said this. Well, good luck to them...and now we can wait even longer and get even better prices. (Please forgive my rude thoughts towards these poor people who are just trying to earn some money...I am just annoyed right now.)

I can understand your resentment based upon your failure to accept earlier offers when you were selling, but why the spite at these sellers who refused your offer? It is a business transaction, why are you personalizing it?

Just move on to the next home of interest to you and try again, eventually you will find something to your liking.

[wanttoteach]

[quote=NewToCA;1273908]I can understand your resentment based upon your failure to accept earlier offers when you were selling, but why the spite at these sellers who refused your offer? It is a business transaction, why are you personalizing it?

I apologized for personalizing it...Did you read my entire post?? I even called them "poor people who are just trying to earn some money." Sheesh!