Where is the bottom?

[80skeys]

My thoughts? That type of stuff is completely unpredictable.

[proveick]

The reason for the question is we just SOLD OUR HOUSE north of Salida !! We were very fortunate in light of the very, very bad rural CO real estate market right now. Bad and getting worse by the month.
Many folks are discounting their homes 30-40% to get rid of them.
Plan on buying in El Paso County some time next year and of course want to buy as close to the bottom as possible. A ton of $130k-$150k homes have sold here due to Ft Carson. RP

[80skeys]

Originally Posted by proveick

The reason for the question is we just SOLD OUR HOUSE north of Salida !! We were very fortunate in light of the very, very bad rural CO real estate market right now. Bad and getting worse by the month.
Many folks are discounting their homes 30-40% to get rid of them.
Plan on buying in El Paso County some time next year and of course want to buy as close to the bottom as possible. A ton of $130k-$150k homes have sold here due to Ft Carson. RP

It's pointless to try to predict the bottom.

[TheBeach]

Originally Posted by 80skeys

It's pointless to try to predict the bottom.

Oh, I wouldn't say it pointless. I think you can predict general trends over the long term, it's the short term stuff that'll drive you crazy

[Vision67]

This shows the housing dilemma

Dr. Housing Bubble Blog

Bottom line: It will take years to get out of the mess.

[Bob from down south]

Originally Posted by Mike from back east

A lot of Option A Arms are due to reset next year. Many of these mortgages have been in effect for a few years now. Resetting doesn't automatically mean default and foreclosure. If those buyers have successfully made their payments for 3-4 years now, that indicates they *should* be able to make them next year, though it's not a given.

No, I disagree here.

The "Pick-a-Pay" or Pay Option ARM (aka "exploding ARM") was designed for the person who has an income that fluctuates, and who needs to be able to make a lower payment in the lean months (i.e. a salesman on commission, or a realtor). They are typically structured with options for a regular fully-amortizing payment, a reduced interest-only payment, and a rock-bottom negative-amortization payment at around 5% less than interest-only. When those loans reach a predetermined neg-am threshold (usually 110% of the original loan amount), it is "recast" to a fully-amortized loan over the remaining loan period. So if a recast occurs at 4 years, the recast would have you making payments on 110% of the original loan amount over the remaining 26 years of the 30-year loan. The difference in payments between the minimum (neg-am) payment and the fully-amortizing payment after recast is generally almost double.

The catch? Credit Suisse says that something like 75% of the borrowers who took POA loans in 2005-2007 have only been making the minimum payment since origination of the loan. Nearly all of these people will default. Banks have been holding these ticking time bombs on their books assuming that loss rates would be a little worse than normal...but the die is already cast, and the loss rates will be (and already are) FAR worse than normal. If the people with these loans are barely getting by as it is, it's not reasonable that they'll survive recasts that effectively double their house payments.

Originally Posted by Mike from back east

Best advice to would-be buyers is stick close to a realtor who feeds you lots of data, know what you want, be ready to strike, and check the foreclosure sales for real bargains (bargain doesn't mean a home that's been trashed).

You also need a realtor that's not going to push you to buy something, anything but soon. That's hard to do in this environment, but not impossible. Extending your purchase timeline is an essential part of a good strategy...but that part is not in the interest of a realtor that is only paid at closing of a sale. Be ready to cut a realtor loose if they're not willing to wait with you, and to that end do not sign a buyer's broker contract (aka "right to buy/sell" contract) with a duration longer than 60 days.

[Mike from back east]

Originally Posted by Vision67

... It will take years to get out of the mess.

Always does. Seen bad housing markets a few times before... mid-late 1970's, late 1980's, again now.

Bob from down south: Thanks for the insights, could be another bumpy time ahead. I always wonder why banks prefer to foreclose and lose their butts on these properties rather than let the mortgage holders continue to pay at the current rates for several more years and maybe come out closer to whole as the economy recovers. At some point they may have to call it quits on some of these loans, but it seems they foreclose them right away, even if the "owners" are paying the minimums. In my way of thinking it seems better to have something coming in but if I foreclose on a guy who's paying me something every month then I lose that cash flow, and I lose a ton when I dump the foreclosure on a glutted market. I guess I'll never understand banks and banking.

My favorite advice remains "neither a borrower nor lender be."

[Mike from back east]

Newspaper says sales soared in Nov 2009 and that prices actually rose. Some of that can be attributed to the First Time HomeBuyer Credit and some of it to increased demand due to thousands of troops being added to Fort Carson. Hard to say if this is a trend or an anomaly.