Is the housing in CA as bad as we hear? (Pittsburg: mortgages, townhouse)

[sliverbox]

My general opinion about California Real Estate is that there are simply way too many people who've been drinking the funky kool-aid for too long and despite their claims of being intelligent somehow can't sit down and spend 5 minutes actually looking at how finance works.

And about those IO/ARM loans.... that will spell the end to those lovely high prices. I'd say throw the darts towards pre-2003 ( adding inflation of course) and you'll get a better idea of where prices are heading over the next few years.

As far as prices trending up recently, this is only due to a temporarily lower supply. This will quickly be alleviated during the spring and summer once the record inventory once again hits the market. Everyone has been hoping for a spring bounce. Everyone that didn't sell last year took it off the market for the winter because that's what their agents told them to do. So it will be interesting to see all those old homes, along with the new ones, and additionally those homes that were bought with IO loans hit the market all at once.

popcorn anyone?

[shannon94]

Originally Posted by sliverbox

My general opinion about California Real Estate is that there are simply way too many people who've been drinking the funky kool-aid for too long and despite their claims of being intelligent somehow can't sit down and spend 5 minutes actually looking at how finance works.

And about those IO/ARM loans.... that will spell the end to those lovely high prices. I'd say throw the darts towards pre-2003 ( adding inflation of course) and you'll get a better idea of where prices are heading over the next few years.

As far as prices trending up recently, this is only due to a temporarily lower supply. This will quickly be alleviated during the spring and summer once the record inventory once again hits the market. Everyone has been hoping for a spring bounce. Everyone that didn't sell last year took it off the market for the winter because that's what their agents told them to do. So it will be interesting to see all those old homes, along with the new ones, and additionally those homes that were bought with IO loans hit the market all at once.

popcorn anyone?

Lending standards are going to be a bit tighter from now on too....it's about time!! Bottom line......stricter standards also means fewer buyers....given the price range of the current inventory vs. current incomes. Pass the salt.....lol

[AK123]

Originally Posted by SouthBayTodd

Have you been to Houston?

Yes... it's a big city with all the big city amenities, world-class culture and lots of interesting little neighborhoods. I like it. You really have to live in and experience it, not drive or fly in and out and judge it from the freeways, etc.

And I'm unclear about the comparison to San Jose... maybe I just came in too late.

[Tallysmom]

Originally Posted by shannon94

Lending standards are going to be a bit tighter from now on too....it's about time!! Bottom line......stricter standards also means fewer buyers....given the price range of the current inventory vs. current incomes. Pass the salt.....lol

Well -- yeah -- lending standards will get tighter, till things get better and investors get greedy again and then standards will loosen up again.

We've been here before, in 1992-93 I believe. Lending was at an all time high, and that was the beginning of the 125% mortgages. The bust was pretty drastic -- some areas did see a steep decline in home values.

I personally knew a few people that paid a lot of money for homes that less than a years later were about 30% less. it was two years or so before they value was back up to the level of the mortgage they had.

Back when I was getting decent grades in Ecomony because I wore this cute little low cut halter top and sat in front -- there was one thing I took from it. Economies are not unlike rubber bands. You stretch and stretch, like the economy expands and expands, and then it SNAPS back... and the boom goes bust. But sooner or later that rubber band starts stretching again....

[sliverbox]

back when I was getting decent grades in Ecomony because I wore this cute little low cut halter top and sat in front -- there was one thing I took from it. Economies are not unlike rubber bands. You stretch and stretch, like the economy expands and expands, and then it SNAPS back... and the boom goes bust. But sooner or later that rubber band starts stretching again....

but... the problem with the picture in CA now is that MOST people who "bought" used loans that are essentially worthless. The boom essentially ended in 2003. That's when banks and loan agencies rolled out IO, ARM, and combo liar loans. This kept the show going for another 2 years in which time housing prices went up another 30%. That percentage is totally based on non-existent capital.

As we now stand, close to a TRILLION dollars worth of IO loans are about to reset. A TRILLION dollars that will only be payable if those who took them out are sitting in homes that have actually gained enough value to refinance, which in many cases did not.This is especially true in CA.

So in my opinion, you are probably right. Someday, CA might "snap" back. But at what expense and at what damage to the economy? I think we are in for a long ride.

[Tallysmom]

Originally Posted by sliverbox

back when I was getting decent grades in Ecomony because I wore this cute little low cut halter top and sat in front -- there was one thing I took from it. Economies are not unlike rubber bands. You stretch and stretch, like the economy expands and expands, and then it SNAPS back... and the boom goes bust. But sooner or later that rubber band starts stretching again....

but... the problem with the picture in CA now is that MOST people who "bought" used loans that are essentially worthless. The boom essentially ended in 2003. That's when banks and loan agencies rolled out IO, ARM, and combo liar loans. This kept the show going for another 2 years in which time housing prices went up another 30%. That percentage is totally based on non-existent capital.

As we now stand, close to a TRILLION dollars worth of IO loans are about to reset. A TRILLION dollars that will only be payable if those who took them out are sitting in homes that have actually gained enough value to refinance, which in many cases did not.This is especially true in CA.

So in my opinion, you are probably right. Someday, CA might "snap" back. But at what expense and at what damage to the economy? I think we are in for a long ride.

Combo Liar Loans... man -- that is classic.

Here's what gets me -- a lot of the stuff I'm hearing now is stuff I heard when we bought our house in 1987. So many of our friends were just CONVINCED it was the stupidest thing ever.

We could have rented a house for a hundred or so cheaper than our mortgage, the owner carried back a 15% mortgage because we didn't have 20% down, and we very probably overpaid for our house, judging by the reaction when I told people how much we paid. So -- we did everything wrong. And yet -- rents now are in 1800-2600 dollar range and my mortgage is 642.50. My income is over a 100K a year and I can stuff away 2500-4000 bucks a month to retire early on.

I think that's why have such a visceral reaction to naysayers. Because we've been there and it was the best decision we could have made.

That being said -- I wouldn't buy a house out here now. But that's far more because of my personal timeline than it is a statement on housing in general.

[shannon94]

Why do people keep comparing the current housing situation to the bust in the 90's???? It's clearly not the same. I guess we will just wait and see. What I love...is all the lender commercials out now encouraging people to get out of their Arm loans ....yet up until this year they were encouraging people to use them.

I'm with you sliverbox!!

[esya]

Ok, then if you were looking for a move, Portland or Contra Costa county? I already live in denver but the ocean is the interest for me.

[sliverbox]

Why do people keep comparing the current housing situation to the bust in the 90's???? It's clearly not the same.

That's very true. You CANNOT compare 1987 to 2007. For one thing, there were real events that brought down the last market: A faltering aerospace and defense industry, an earthquake, and a slow economy. NONE of the above have anything to do with today's market.

As we now sit, the economy is robust, there haven't been any earthquakes ( yet) and the tech industry seems to have recovered somewhat, though not anywhere near to the level that it was even in 1997. What that tells you is that price alone is enough during this boom to topple the market.

Throw in any other negatives, such as a souring economy, outsourcing, and so on ( the current subprime loan fiasco is a good possibility) and it will not take much to make what appears to be a slow downward spiral into a rather dramatic bust.

The last time the housing market recovered in the BA, the tech industry saved the day. I'm not so sure that there is a safety net now.

Anyhow, I'm not deluding myself. We rent an entire house for 1/4th of what it would cost to buy. What we save is far more than what a house in the current market would gain in value. We will wait a few more years and if prices come down to an acceptable level... we might buy. If not, we won't.

Besides, almost all California homeowners will have to sell when they retire anyway and move to another state since they'll be unable to pay the property taxes alone.... So in reality, if you buy you're just renting long-term.

Anyhow, this housing situation is ludicrous. It'll crash eventually. Just be patient.

[SouthBayTodd]

Originally Posted by JJP

Yes... it's a big city with all the big city amenities, world-class culture and lots of interesting little neighborhoods. I like it. You really have to live in and experience it, not drive or fly in and out and judge it from the freeways, etc.

And I'm unclear about the comparison to San Jose... maybe I just came in too late.

Houston might be a nice place to live, I'm not saying it isn't. But saying it has "world-class culture" is more than a stretch.