Housing Decline (Denver, Louisville: foreclose, renter, mortgage)

[CareFreeAZ]

Originally Posted by tfox

The "over zealous" 2005 never happened in Colorado the way it did in Arizona. We had very modest appreciation in 2005 and little to no out of state speculation. The Denver area hasn't had any sort of significant housing appreciation metro wide since the 1990s.

That doesn't mean that there won't be some sort of decline here, but Arizona is a different animal. There, I would see a steep decline as quite likely, since I don't think the 2005 prices were "real."

tfox is right on the money as Denver Metro saw it's appreciation in the mid 90's and has a more realistic market in terms of prices. I have noticed some of the properties that we were looking at South of Denver and North of Colorado Springs have recently dropped their listing price. Alot of these have been listed since May.

[sberdrow]

Originally Posted by CAMom

I agree with 2beindenver when looking at the market stats. and remember that 98.7% of mortgages are not in foreclosure as of today(saw it on cnbc this morning otherwise i wouldn't know something like that). Real estate appreciation is not a straight line upward like any other investment it's zig zag, just sucks if you bought on the zig and not the zag. But 20 years from now, if you own in a nice area with amenitites (golf course, open space, etc,etc,) i bet your home will be worth more. It's worth more now than it was in 1980, if it even existed then. I'm from Ca so we have tons of 1940's homes. in 1970 where i live most cost about 25,000 now between 500,000 to 700,000 at today's adjusted prices not the crazy 06 market.

well what about Washington Mutual and Country Wide? They just reported disasters in their sub prime lending divisions. Also, the number 2 lender for subprime loans just went belly up. Oh its just beginning, this a tip of the iceberg. Its not all bad for the sellers, remember that even though your house is worth less, the house you want to buy is probably worth less too. It is bad news for people who might want to refinance though. a 250,000 loan on a house that is only worth 220,000 might be a tough one.

[CAMom]

do you know what percentage of the total loans out there qualify as sub-prime. My buddy is a broker in town here and says its a very small percentage but that the media has jumped all over it. The thightening of lending regulations has really put a squeeze on the people that don't have much to put down. and the ARM's kicking in on people who really shouldn't have gotten loans but for very lax guidelines is yet to be felt. Once again though this is one of those zag's to go down in the history books with all the other ones.

[sberdrow]

Originally Posted by CAMom

do you know what percentage of the total loans out there qualify as sub-prime. My buddy is a broker in town here and says its a very small percentage but that the media has jumped all over it. The thightening of lending regulations has really put a squeeze on the people that don't have much to put down. and the ARM's kicking in on people who really shouldn't have gotten loans but for very lax guidelines is yet to be felt. Once again though this is one of those zag's to go down in the history books with all the other ones.

Its not just sub prime loans that are being defaulted on. Have you noticed the amount of foreclosures. Its staggering.

[2bindenver]

Originally Posted by sberdrow

Its not just sub prime loans that are being defaulted on. Have you noticed the amount of foreclosures. Its staggering.

You are right. All types of loans are being foreclosed on, but it is such a small percentage of the overall ownership. Small pockets will be affected more than others. Some areas will be relatively untouched.

Just like the 1980's only the Denver area has a much greater population and interest rates are a lot lower.

I don't think you'll see 15 pages of HUD owned homes like before. Too many investors looking for the next bargain.

[formercalifornian]

Originally Posted by 2bindenver

I don't think you'll see 15 pages of HUD owned homes like before. Too many investors looking for the next bargain.

I thought Colorado didn't have any investors/speculators.

Seriously, though, here's a quote from an AP article published today...

"But there is still reason to be alarmed because the trouble with option and interest-only ARMs still appears to be in its early stages. Many industry observers suspect the biggest problems will emerge during the next 16 months as shoddily underwritten ARMs made near the real estate market's peak in 2005 and 2006 climb to higher interest rates."

tfox made a comment earlier about Denver-area appreciation happening in the 90's and referred to our local market having more realistic prices than Arizona. That may very well be true, but it's potentially irrelevant. Regardless of prices, Denver may still be in jeopardy from these types of loans. What I would like to see is how many new and re-financed loans in this region are of the toxic variety, and what percentage of households they represent. That might give us a better idea of our real estate market vulnerability.

Anybody have any numbers they'd like to share?

No matter what the overall picture is, these issues could explain what is happening on my street, as Douglas County's newer neighborhoods have a much larger percentage of toxic loans than more established areas. Older neighborhoods could see more price stability because owners, barring the possibility that they have been using their homes as ATM's, are less likely to be facing foreclosure due to adjusting rates and can hang on because they have no reason to sell.

[CAMom]

I still live here in socal where 98% of the communities are old unlike colorado's ratio of new developments to old ones. Plenty of people I know were using there house as an atm. My friend whose a mortgage broker in town here (burbank) he had 400 employees at one time, he told me alot about what he had seen in the business. Most people unfortunately just worry about the payment and not the long term aspect of the loan they get sold. He said it's pretty sad. Cheap money with loan officers that are more than happy to see you sign on the dotted line. What happened to due diligence? When things were hot out here there were plenty of young people at his office making 10 20 or 30 thousand a month, no joke!

[CosmicWizard]

formercalifornian wrote:

"But there is still reason to be alarmed because the trouble with option and interest-only ARMs still appears to be in its early stages. Many industry observers suspect the biggest problems will emerge during the next 16 months as shoddily underwritten ARMs made near the real estate market's peak in 2005 and 2006 climb to higher interest rates."

The banks / mortgage holders must be making some big bucks out of this thing, otherwise the obvious solution to the crisis would be to simply keep the lower rate in effect until the crisis blows over.

blessings....Franco

[tfox]

You know, every time there's a housing slowdown, like we're in now, those who don't own property gather together and hope and pray that the market seriously tanks. Sometimes a local market will drop -- indeed, Los Angeles had a serious housing tumble in the 1980s. Grand Junction had a bona-fide crash after the 1970s energy boom went bust. Metro Denver could yet have a drop in the next few years, it is true. We likely haven't seen the worst of the sub-prime or foreclosure mess.

Sometimes, one can profit by waiting a slow market out, it is true. But, like any "timing" of the market -- there are risks involved. The real risk of trying to time the market is that you have to make an accurate prediction twice: first on the downswing (by NOT buying or even selling your assets), and then on the upswing (buying after the market has bottomed out). Most people aren't that smart. I'm certainly not. And attempting to time the market too closely over the short term smells a lot like speculation -- it's too easy to get burned that way. There's a big difference between INVESTING in property and speculating.

That's why, the best advice is to figure out if you're in a time period in which you're not likely to move in 3-5 years or more (the longer the better). Then, take your time and learn the area, scout for really good deals on property, and then finally make an offer on a property that is undervalued, but is in the right area for future growth. It's never wise to be in a hurry, and it's always good advice to get as much knowledge as you can before making a move. Renting for a few years for that reason is wise. However, in my view, attempting to time the real estate market simply for the sake of timing is not wise.

[formercalifornian]

Originally Posted by tfox

That's why, the best advice is to figure out if you're in a time period in which you're not likely to move in 3-5 years or more (the longer the better).

I think more than five years is absolutely essential. I sold my last house after eighteen months, because a job didn't work out the way I had hoped. Fortunately, I had the equity to burn, but it didn't feel good. There are many reasons for me to sit this one out, not the least of which is that I'm still not sure Colorado is going to be my long-term home. No offense, but I think I prefer the coast, and I'm hoping to make my way back there someday soon.