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I think it is bothersome because the lower price affect your buying power. People used their homes as collateral on loans for cars, college education, vacations etc. Not saying it was the right thing to do, but people did and used that money to acquire more things. Now there is less money.
People who want to retire and move to retirement location can't sell their family colonial up north because the prices have fallen.
People who need to move because of a job, or divorce can't sell their homes.
Good reasons to feel bothered that an asset is now worth a lot less.
We'll be moving in a year for a job transfer, so it bothers us. Otherwise it really would not. Even so, I am trying to stay composed b/c its still a year off and the market will bear what it will bear whether or not I have a panic attack about it.
I guess it bothers people the way watching retirement investments falter in the past year bothered people who are 20 yrs out from retiring. Just a little disconcerting - best to try to stay calm but difficult to do. Every time you turn on the news its all about the housing crisis and the stock market fluctuations.
This is a question with a very obvious answer. Many people bought and refinanced homes when values were way up. Now they have homes with huge payments and owe more than their housed are worth....I can certainly see why this would bother someone, especially if they have lost their job or need to move for whatever reason. Plummuting house values, high house payments, a weak economy, loss of jobs - these are the main reasons there are so many foreclosures in certain areas.
When house values were high in our area of So. California ( through the roof really ), we knew we were going to retire in a few years. It was exciting to think about hte large profit we were going to make on our home. Values came down substanially by the time we sold our 14 months ago...things have gotten much worse in that area since then. Fortunately we had owned our home for a long time, had plenty of equity and were able to sell within 3 weeks. Many have not been so lucky.
You can do everything right and still get screwed.
I own a 3500sf home, waterfront, in MN. I bought in 1995 and put it on the market to sell in 2005. I can't sell it at all. For 5 years, I can't sell it.
I remodeled that house from top to bottom with my own money. I've lost every dime I spent and all my equity. After all, something you can't sell is worth...nothing. I planned my retirement based on 10% plus or minus what a realtor and an appraiser told me the property was worth. 440K MOL. Well guess what, I can't sell it for 200K.
I made a big mistake being responsible and frugal. I should have used my house like the cash cow it was for a while. New cars and fancy vacations. Everything I wanted. Then I would have deserved what I got and wouldn't feel so bad about it.
Timing and location are critical. For example SoCal house prices (and Las Vegas and Florida) really ballooned. But not all places bubbled to that degree. (I still haven't figured out why.)
So, a person who bought in LA in 1997 (local minimum), then sold in 2006 (local maximum) and moved to Denver wouldn't lose as much as he would have had he stayed in LA. He could keep a lot more of his equity (because Denver for example doesn't have as big a bubble to "pop") and move back to LA now that housing prices in LA are getting back down to what are required by the supply demand models.
You can get a rough idea of what a "normal" "equilibirum" "sustainable" house price range would be by looking at median incomes.
Equilibrium housing prices need to be inline what people can afford to pay based on their incomes, interest rates, and down payments. Right now interest rates are pretty low and there is a lot of rigidity in lending practices.
So, in the target neighborhoods in West LA for example (I am plagiarizing these data from one of my posts in the LA forum), what are the median incomes? Is there any reason that most homes there shouldn't be worth more than three or four times that amount?
One of the major "hardships" over the past few years, with the housing bubble and all, has been declining house prices. But how many people really "struggle" with this?
> Lower property values mean lower taxes
> Most people don't seem to plan on selling their homes soon
> For first-time homebuyers, the lower home values are GREAT!
Are people so freaking ambitious that they need to move out of their homes every few years, or is there some other reason why low home prices are bothersome?
Lots of reasons......and I'm sure you've seen most of them posted already. Me? I'm frustrated with what happened in my area a few years back. The community I live in had some very affordable homes in it. Developers came in and put in some condominiums, bought up a bunch of the available homes in the area, borrowed tons of money and fixed them up. Those of us who planned on being here for the long haul, have paid a huge price. Our property values doubled, as did our taxes! For some folks, mainly the retirees, those inflated property/tax values have caused them hardships, due to the extra money needed to pay those taxes. Oh.....incidently, the developers who came into the area to rape the community?... they went bankrupt!! Unfortunately, those of us living her are still paying the price in property taxes.
Another thing that drives me to distraction is this..... Some of the newer homeowners, those who claimed to want to own a piece of property here in our serene little oceanside community (because the folks are so friendly and life is so much simpler here....) started creating a huge stink here, once they purchased their properties and started remodeling.
Here's their stink... If their neighbors' property looked like a "fisherman's home", complete with a gearshed, fishing nets or crabpots, (which don't always smell linen fresh...especially in the sun), they started running to the city and county commissioners and complaining that the neighbors' property condition was "de-valuing" their own. Complaint after complaint was filed. New ordinances were brought into play and that has forced, already financially strapped, fishermen to have to change their way of life, build new structures to hide their gear, etc. We're not one of those families, but it still makes us angry!
Our property values doubled, as did our taxes! For some folks, mainly the retirees, those inflated property/tax values have caused them hardships, due to the extra money needed to pay those taxes.
Damned if I know, they are trying to say that the increase will be for essential services......but I dont see any pay cuts for commissioners and county employees being discussed.
There are going to be a series of meetings held to discuss this tax increase, I will be attending.
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