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You make it sound like California has its own bubbles. Here in south Florida, houses were cheap in the 1980s all the way to mid 1990s then the price crept up then exploded in around 2000. What kind of house could be $230k in 1995 and $2.5m in 2005? Howcome nothing this insane has happened here in s. Florida or anywhere else for the matter? There has to be a logical explanation but im just gonna guess the seller wants $2.5m for a house worth maybe half that. We have a seller like that who wanted $895k then $750k. I Zillowed his house and its worth $417k now! Hes gonna have to lower the price way down to like $399k to sell! Its a smallish 1860 square feet house on a $200-250k 1.25 acre lot. He, nor anyone else in my neighboor can sell due to asking way too much. This may be the case for some in s. California. Their houses were never worth this much, they just have the insane greed to ask way too much.
You make it sound like California has its own bubbles. Here in south Florida, houses were cheap in the 1980s all the way to mid 1990s then the price crept up then exploded in around 2000. What kind of house could be $230k in 1995 and $2.5m in 2005? Howcome nothing this insane has happened here in s. Florida or anywhere else for the matter? There has to be a logical explanation but im just gonna guess the seller wants $2.5m for a house worth maybe half that. We have a seller like that who wanted $895k then $750k. I Zillowed his house and its worth $417k now! Hes gonna have to lower the price way down to like $399k to sell! Its a smallish 1860 square feet house on a $200-250k 1.25 acre lot. He, nor anyone else in my neighboor can sell due to asking way too much. This may be the case for some in s. California. Their houses were never worth this much, they just have the insane greed to ask way too much.
I'm from California and yes these things are happening out there!! Well...they WERE..now prices are starting to fall. It's not the greed of the the sellers it's the stupidity of the buyers and the creative loans that have been popping up over the last few years!! By the way...Zillow isn't the bible on real estate...it's wrong frequently.
It all depends upon which portion of the country to which you are referencing. For example, I project the housing market in the Scranton/Pocono area of Northeastern Pennsylvania to continue to climb steadily upward for years to come, as people are continuing to be "priced out" of NJ/NY and are heading in droves to PA for its cheaper real estate prices. Housing prices in our region continue to be "undervalued", but I've seen some sharp increases since 2000 in particular.
I've also heard that Zillow is not exact...
Hi Need_A_H!
Oh yes that kind of increase indeed DID happen here in SOFL!!!
I posted about one house that someone made 100% profit on in ONE YEAR!!!!!!!
Go to the miami-dade county website & do property searches.
You can also do comparisons on EWM's site...
If a house was 250k 10 years ago, but each year had a 50% profit, it's at over a half mil in 3 years! The math isn't exact, but yeah, it's possible!
It HAPPENED!!!
Hey MoMark -- It looks like the Scranton PA area is another area where prices are increasing. Oh, but maybe he is an Ostrich too!!
I won't do your research for you marysally, but one would hope you'd do a bit yourself instead of superficially skimming before trying to share your Ostrich suit!!! There's no question that those managing to sell in the highest priced markets that have had the greatest appreciation during the last five years can cause prices to rise in areas where they're low as they flee with cash from sales, even in a housing downturn regionally or nationwide. Not everyone is a loser, even in the worst markets like Florida, Michigan, California, Nevada, Arizona, Washington D.C. The trend is national based on first the highest markets collapsing first and then radiating outward. No one knows the extent of how far it will go, but your comments now and before belie an ignorance of the general conditions with no consideration taken of other factors like employment trends, foreclosures soaring around the country (even in Texas which is not considered a bubble housing market), the mortgage industry, the fall in new construction combined with construction company share falls over 1/3 on the stock market, the incredible nationwide increase in home inventory, the rise in commodity prices and what's causing it, the fallout in home supply stores which are watching sales fall, layoffs happening in mortgage and title companies as business slows, or how the various markets are inter-related, or why there's even this issue when we're not in a recession already? Traditionally real estate markets have been local in both rising and falling, respectively rising in Los Angeles in the 80's during the government spending boom, and crashing in Houston in the mid-80's after the oil bust. But this crash is affecting regions simultaneously NATIONALLY, and there's not a recession to blame for it yet. While historically housing price declines and falling demand result from recessions, the unemployment rate is low, interest rates are still low...we don't have a traditional answer to fall back on. We're in unchartered territory. That's why this particular housing bubble/decline is so worrying and why it is affecting the nation so severely that the Feds have stopped raising rates and so many Americans are vulnerable. Surely you can add 2 and 2 and see where 4 comes from. I don't mind at all debating you if you'd like to debate, I'd just ask that you come with some research and a valid argument, or, not attempt it. That's all
WASHINGTON (MarketWatch)(Sept.25) -- The collapsing U.S. housing market crossed another milestone in August, as the median sales price of existing homes fell for the first time in 11 years and for just the sixth time in the past 38 years, the National Association of Realtors said Monday.
Pittsburgh Tribune Review; Sept.10: "Home prices in Region Decline in 2nd Quarter".
A new government report seems to indicate an easing of home prices in the Pittsburgh area.
Prices during the 2006 second quarter in the region dropped 0.24 percent, according to the report issued by the Office of Federal Housing Enterprise in Washington.
That's down from an increase of 1.86 percent in the year's first quarter.
As reported by Bloomberg News, the decline in U.S. home-price growth for the second quarter was the sharpest three-month plunge on record, and indicates this year's housing slump is deepening.
"The wheels are coming off the housing market," Scott Anderson, an economist at Wells Fargo & Co. in Minneapolis, told Bloomberg.
The drop for the U.S. was the biggest since the agency began keeping records in 1975. The report doesn't give an average price, only the percent of change.
MSNMoney: Boom to Bust almost Overnight2006 may well go down as the year Pluto was suddenly just another big rock, Brad and Angelina had a baby and the real estate market slid from great to miserable in a few short months.
In data released Tuesday, prices declined in more than 61 of the 275 cities tracked by the Office of Federal Housing Enterprise Oversight. And the deceleration has been fast: The agency reported that the decline in quarterly appreciation was steepest in more than three decades.
Nationally, at the end of August, sales of existing homes were down 11.2% from July.
Among prominent cities where second-quarter prices fell were: Boston-Cambridge, Cincinnati, Detroit, Indianapolis, Kansas City, Manchester, NH, Pittsburgh, Pa., Portland, Maine, Reno, Rochester, Minn., Toledo and Youngstown, Ohio. Prices fell in the California cities of Napa, Sacramento, Redding and San Luis Obispo, and in the Florida cities of Fort Walton Beach-Crestview-Destin and Punta Gorda.
Price decreases, however, largely were concentrated in Colorado, Ohio, Pennsylvania, Michigan and Indiana
I was not the one who said that Scranton PA prices were rising -- I only pointed out what another poster had stated. I have no research on that market other than the word of that resident. Maybe he is deluded. I don't think so but it could be.
Hopefully you noticed in the list of areas where prices were crashing that there were none from the Southern states (FL is not a Southern state!!). I also am not the only one who stated that the Southern states were doing fine - MB who apparently works in mortgage banking said the same thing. My greatest fear with the constant drumbeat from the national media is that they will manage to turn our good market. Will you at least admit that it is possible that this is media driven since as you pointed out there is no fundamental reason for the price drop in some parts of the country. I personally believe that this is being driven by a combinaton of areas where the speculation caused the prices to rise to a point that is unsustainable and the national media taking off with the story. It isn't as good a story to the national media -- it sounds better to say that the price crash is nationwide. I don't appreciate being called an Ostrich when I am only pointing out what I have evidence to prove. Where is your evidence that the market in the Southern states is crashing? I haven't seen your evidence yet. If this is a NATIONWIDE crash as you say shouldn't the Southern states be considered? How can you have a NATIONWIDE crash when one complete section of the country is not included? And before you throw out that Ostrich thing again, I have looked in the city where I live and there is a noticeable shortage of homes for sale. I have driven through large neighborhoods where I would have expected to see some (4 or 5) homes for sale and found 1 or 2 at most (some none at all). When one does come on the market, it is snapped up in very short order. There also are very few foreclosures, but then exotic mortgages were never popular around here.
These numbers are very rough estimates and of course vary depending on where you live. But here goes....the median income for a family in the U.S. is about $42,000. That means the monthly gross income is $3500. By traditional mortgage calculations, you should be spending no more than about 30% for paying your mortgage. Let's stretch that to 41% thru an FHA loan. that would be $1435/month including taxes/insurance/PMI.
Now, the median home price is approx $240k(i could be off here). That translates into a mortgage payment of $1477/month assuming 30 yr fixed, 6.25% interest, and that does NOT include taxes/insurance/PMI. So it's getting to be that most people can't afford to buy a home. And that is basically assuming that all of your debts are included in that 40% or that you have no debt. Who out in the real world does not have student loans, car notes, credit cards, etc? So the more you owe, the less house you can buy.
These numbers are very rough estimates and of course vary depending on where you live. But here goes....the median income for a family in the U.S. is about $42,000. That means the monthly gross income is $3500. By traditional mortgage calculations, you should be spending no more than about 30% for paying your mortgage. Let's stretch that to 41% thru an FHA loan. that would be $1435/month including taxes/insurance/PMI.
Now, the median home price is approx $240k(i could be off here). That translates into a mortgage payment of $1477/month assuming 30 yr fixed, 6.25% interest, and that does NOT include taxes/insurance/PMI. So it's getting to be that most people can't afford to buy a home. And that is basically assuming that all of your debts are included in that 40% or that you have no debt. Who out in the real world does not have student loans, car notes, credit cards, etc? So the more you owe, the less house you can buy.
on a $240k house(U.S median has dropped to like $210k by the way) the property taxes would be about $4k a year(give or take depending on the city) Insurance would be variable but in south Floridia would be like another $4k a year. If there is HOA it could be $150 a month. Then theres repairs, maintainence, mowing the grass, watering the plants, etc. Could be $2k a year or more. Were talking $800 to $1000 additional expenses a month of home ownership. Thats on top of about $1500/month mortgage. Youd be looking at $2300 to $2500 a month expenses on a $240k house. Taking the 30% rule as a maximum, youd be looking at about $8k a month gross salary, spending 30% a month comes out to $2400. How many individuals make $96k a year? If we are talking about a combined income, youll have to spend less than 30% cause theres more than 1 mouth to feed, cloth and drive. If you have children, much of that 30% that goes to the house has to go to feed, cloth, buy them toys and stuff. I even made a poll and most people voted that the maximum house they can afford was around $100k with some voting as little as $25k and some as much as $200k. Very, very few people can afford more than $200k of house. I can afford about $50k of house, maybe a little more. Even that is alot of money!
The real estate market is like all markets in a free market system,, all markets are influence by host of varibles. If you try to point to one specific,,, like financing, you will miss the mark. You must look at the big picture and study the history of our economy to understand that these cycles are normal and their impacts vary depending on your personal financial picture, where you live, and if you need to sell your house.
Most Americans will not be directly affected by this correction, because most will not be changing their residence. Those that HAVE to sell or buy will either notice a shortage of buyers or an abundance of houses to choose from coupled with low interest rates. The slow down or correction will have a ripple affect but a strong economy can withstand the negative impact that will result. If the country experiences am increase in foreclosures that is not bad,, because it presents an investment opportunity for a lot of people who manage their money wisely. It is a half full VS half empty set of circumstance. Its your choice if you chose to take the half empty view of the world you may miss many opportunities. Just remember many, many people made millions during the great depression.
I have been following the real estate market all over the country for the last two years because I might want to move and I enjoy the shopping. It is easy to see prices have stopped climbing and the number of homes for sale has increased, but most places have not lowered their prices substancially. Some areas have made token reductions but nothing to make someone jump.
When I see a major drop in the asking prices then I might tend to believe we are in for a very long correction. If the prices hold at current levels or just make a token drop then the correction will have shorter legs.
Keep smiling and look for opportunities instead of spending your time worring about what other have done with THEIR money and finances.
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The math isn't exact, but yeah, it's possible!
Let's do the math...
