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I understand and agree with your point about a home's value. Some folks say that a current price is a "deal" because it is a $400K home a few years ago.
Whether it really was or not depends on the location and quality, etc. Value is a perceived thing. Prices that ballooned for a short time due to greed, etc., are not really representative of real value. It is a mistake to gauge the true value of anything on a one time peak price. What if we did that with stocks?
As with everything, one has the right to pay whatever they want for something. If a person wants a specific home now, then they pay the current pricetag. If one thinks the price may go down more, then they can wait and see, taking the risk of someone else willing to pay the current price may buy now.
With some things, I tend to favor the "deal", and deals come to the patient. On the other hand, there have been things I've jumped on not wanting to risk losing it. In the end, we all have to "own" what we do and be happy with the decisions we make.
Frank
Hello Frank,
I like to go with the numbers and what has worked for the last two hundred years as far as affordability.
I like using median incomes versus median prices of homes. The median price of a home should be no more than three times the median income for that particular area.
It makes the most sense this way and one doesn't have to wonder if they got a good deal or not or if they over paid.
We are not there yet with the medians, we still have a ways to go yet.
My median income in my zip code is 72,803 but the median price of a home is now at 305,910. It should be 218,409 so as you can see we are not there yet by 28%.
Here is a very good article written back in 07 that I had saved. It gives a wonderful explanation:
I like to go with the numbers and what has worked for the last two hundred years as far as affordability.
I like using median incomes versus median prices of homes. The median price of a home should be no more than three times the median income for that particular area.
It makes the most sense this way and one doesn't have to wonder if they got a good deal or not or if they over paid.
We are not there yet with the medians, we still have a ways to go yet.
My median income in my zip code is 72,803 but the median price of a home is now at 305,910. It should be 218,409 so as you can see we are not there yet by 28%.
Here is a very good article written back in 07 that I had saved. It gives a wonderful explanation:
I can say this about the current situation. The numbers of good homes at decent prices is declining by the hour out there. No question about it. I've been looking, making one last ditch effort to find a good home. If there is a bank repo in good condition, 20 people are going to bid for that home. The selection of short sales, in nice areas, in good condition is fading by the second. When I first arrived, we could find 5-10 each day, to go view. Priced right, in good shape, in nice areas. Now we are seeing 2-3 per week, if that and a bunch of people are fighting for them.
That said, I predict after the first time home buyer rebate ends, things will slow to a crawl, even if they extend it, due to the lack of a time limit. Prices might dip a little again, as inventory increases. But overall, I still think you're seeing the bottom in the rear view mirror. The bottom was around May-June.
Right now, there are still several repos and shorts out there, but anything that is left, is left for a reason. It's either got major defects, in a bad area, or is a mold infested factory. Trust me on the above, I've been looking for months now.
I can say this about the current situation. The numbers of good homes at decent prices is declining by the hour out there. No question about it. I've been looking, making one last ditch effort to find a good home. If there is a bank repo in good condition, 20 people are going to bid for that home. The selection of short sales, in nice areas, in good condition is fading by the second. When I first arrived, we could find 5-10 each day, to go view. Priced right, in good shape, in nice areas. Now we are seeing 2-3 per week, if that and a bunch of people are fighting for them.
That said, I predict after the first time home buyer rebate ends, things will slow to a crawl, even if they extend it, due to the lack of a time limit. Prices might dip a little again, as inventory increases. But overall, I still think you're seeing the bottom in the rear view mirror. The bottom was around May-June.
Right now, there are still several repos and shorts out there, but anything that is left, is left for a reason. It's either got major defects, in a bad area, or is a mold infested factory. Trust me on the above, I've been looking for months now.
Well I appreciate your months of effort, I have been studying and tracking the housing bubble since 2002.
The medians don't lie, we are not even close to a balanced market yet thus NO bottom.
Why would you think that the price of homes would not continue to drop? The only homes that have sold are just like you said the REO and short sale homes.
You are overlooking one important factor:
PAYMENT OPTIONS MORTGAGES.
There is a MASSIVE amount of Mortgage-Defaults on the horizon. Think of the crash as a baseball game and we are in inning number three.
Where did my opposition run off to?
He never bothered to answer my questions, thus it has always gone this way. I get into a discussion and prove my point with figures and facts and I never see them again.
Just read my reputation post comments and see for yourself.
Read my arguments from 07 on the bubble and see I was right, not that I am gloating, ok just a bit.
I worked hard at gathering my knowledge and data so I earned it. No one took heed.
I will continue to speak on the same topics until we truly are at the real bottom.
I speak the truth whether people wish to believe it or not it is the truth.
I speak the truth whether people wish to believe it or not it is the truth.
I believe you, no bull the prices here are way over what the median incomes can afford. It's still too expensive here based on the salaries overall for the average person to afford a house.
Rule of thumb is 3 times your annual salary. $200-240 would be more like it for the average earner (median family) in PBC.
Where did my opposition run off to?
He never bothered to answer my questions, thus it has always gone this way. I get into a discussion and prove my point with figures and facts and I never see them again.
Just read my reputation post comments and see for yourself.
Read my arguments from 07 on the bubble and see I was right, not that I am gloating, ok just a bit.
I worked hard at gathering my knowledge and data so I earned it. No one took heed.
I will continue to speak on the same topics until we truly are at the real bottom.
I speak the truth whether people wish to believe it or not it is the truth.
Sorry sold two more homes this weekend. Got better things to do than be your "opposition".
Perch on your fence and wait for your real bottom it doesn't bother me a bit.
Telling people not to buy homes in your area only hurts the economy around you. We'd all (except for the 1000's of more people that would end up going into foreclosure) love to see home values drop even more so we could all run out and pick up a big house for nothing. That's my problem and my point with your point of view. If everyone sat around and waited for the market to crash even further even more people would lose their homes. Even though it may not benefit your plan, for the rest of us it is a good thing that people are buying homes right now so the values don't drop further.
Whether you believe the market is overpriced or not, please answer me this what happens to an economy when no one buys homes??
Yes, more foreclosures are coming on the market you are not sitting on some top secret info.
I find it funny you're bragging about predicted 07, the signs were there and most people knew it was going to happen, but nobody wanted to believe it. People were making more money in their homes than they were in their jobs, why would they want to believe it would stop? I know everyone was greedy, please don't go into that speech...
Sorry sold two more homes this weekend. Got better things to do than be your "opposition".
Perch on your fence and wait for your real bottom it doesn't bother me a bit.
Telling people not to buy homes in your area only hurts the economy around you. We'd all (except for the 1000's of more people that would end up going into foreclosure) love to see home values drop even more so we could all run out and pick up a big house for nothing. That's my problem and my point with your point of view. If everyone sat around and waited for the market to crash even further even more people would lose their homes. Even though it may not benefit your plan, for the rest of us it is a good thing that people are buying homes right now so the values don't drop further.
Whether you believe the market is overpriced or not, please answer me this what happens to an economy when no one buys homes??
Yes, more foreclosures are coming on the market you are not sitting on some top secret info.
I find it funny you're bragging about predicted 07, the signs were there and most people knew it was going to happen, but nobody wanted to believe it. People were making more money in their homes than they were in their jobs, why would they want to believe it would stop? I know everyone was greedy, please don't go into that speech...
Well you failed to answer my questions. I am not surprised.
Since we both find some humor in this, I also find this funny.
When I point out facts, figures and data. It always comes down to someone like me being accused of something. This time "wanting to buy a home for nothing".
All I say is I refuse to honor the bubble and pay for it. I will let the people that were greedy in this mess work out their own problem without involvement of my cash to fix it for them.
I will watch the market get back to historical norms again. The median price of a home will be three times the median income. When this happens I will more than gladly purchase a home.
I encourage all people to wait until the median price of a home in their zip code is three times the median income for their zip code.
It certainly is tragic when the value drops and wipes out hard earned money. A lot believed real estate only goes up and that they were "safe". Not everyone made money off of the bubble. I do feel for the ones that are getting caught in the cross fire of this I do because I am also caught.
But, like you said this bubble had people making more money than their jobs were providing and didn't have to do anything in the process.
Do you really think that this problem can be eliminated simply by having people just buy houses?
People not buying homes has very little to do with the current foreclosure situation.
In fact it makes it worse because values are going to drop regardless, due to the bad mortgages that were written. The people that are now buying homes will be the next group of people underwater and wanting to also walk away when they owe more on their mortgage than their home is worth.
What about the fact that 13 million homes could enter foreclosure over the next five years?
One out of every eight mortgages is currently in default or foreclosure?
The next wave of foreclosures is from resetting interest rates on payment option adjustable rate mortgages and interest-only mortgages. These types of mortgages do not qualify for loan modifications.
Many homeowners that have ended up with loan modifications are now deeper upside down than before, increasing the chances they’ll re-default again.
The only way people were able to afford these homes in the first place were from the toxic mortgages that they were given (that are now causing all of these problems)
Salaries did NOT keep up with the amounts that homes climbed to so people could NOT afford homes with regular conventional mortgages.
You want a fast solution?
Have the banks be forced to "cram down" these mortgages by lowering them and completely wipe out the bubble excess.
This is an instant solution for all homeowners that are upside down. Perfect solution for homes to start selling again I would buy immediately.
Problem is this is grossly unfair to banks and investors.
OR
Raise all salaries so the medians are back in balance again. I again would immediately buy and not care as the problem would be solved.
OR
Print more money and give everyone piles of it.
Our dollar would become worthless but we would all have houses.
Since none of these ideas will actually happen the only real solution is to allow homes to become affordable again based off of two hundred years of proven results. Median home priced THREE times the median income.
These are not questions asked directly to you, rather for the reading audience to pounder on.
Why is it wrong to want back what worked for two hundred years?
Why should people have to accept buying half of the house that they could have had if the bubble had not happened?
Why should an innocent person buy a home and save someone from it to become the next "victim" when the value drops below what they paid?
The only homes that I see selling currently are the REO properties. I don't want one, due to needs fixing up, grass ruined, etc. etc..Why should that be my only solution for a price that is closer to the median?
My answer to your question:
"what happens to an economy when no one buys homes??"
The economy finds another "bubble ".
People NOT buying homes didn't put us into this situation. It was the people that DID buy homes.
Look to the Bond Market now to be the next bubble.
Good night.
I am done with this. I know that I have received several rating from this. I know that I have helped a couple of people and that makes me feel good.
I feel sad for some people that I know that did buy during the bubble. One person in particular that bought a retirement home. I feel for this person a lot and hope that it works out for them in the end.
Here's the deal: If you are comfortable paying X price for a house, then go for it. If you can't wait, then wait. For me, it has worked out. I was paying $1500/month for my condo, which I loved, but now I pay a few hundred more per month for one more bedroom, a pool, and private yard....that's WITH taxes and insurance..... (my mortgage interest and tax write offs, by the way, saved me thousands last year).
Sometimes I wish I had waited, but in my target area, I haven't missed out on anything yet that has made me regret my decision.
From watching friends currently in the market, however, I believe that if prices continue to fall, people should be prepared to compete with cash investors and bidding wars in the coming years. A lot of people are sitting on money, and can swoop in and offer cash for homes. It's already happening in some places and neighborhoods in PBC. Banks are not flooding their inventory on the market.
If you're a traditional 30 year mortgage buyer, also look at projections for the interest rate mortgages. That 100k house at 8% isn't more affordable for a monthly bottom line than the 140k house at 5%. Again, look at ALL variables.
I bought a big screen TV two years ago for $1300. That same TV can now be had for $750. Do I regret not waiting? Nope. I'd be waiting forever for the "bottom" of the electronics market, lol.
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