Does anyone feel that by the time..... (mortgages, new home)

[Weis02]

Originally Posted by thisguy

Following up my comments earlier today (boy this thread went in 10 different directions this afternoon) I just found this blurb about Florida markets... reinforces my (and other people's comments) that other parts of the country will indirectly affect NC's market, if for nothing else, slowing down the migration by 6-8+ months for every person trying to move out of a former "bubble price" area, as they need to readjust their prices downward in a very slow and emotionally painful way. YOu can see the panic in the home builders by the stastics below, and those "new shiny" houses are competing with ones people are trying to sell... and they are having hard time selling new construction ... (which seems to be everyone's favorite) so just imagine construction that is (gasp) 8 years old.

Florida Real Estate
8/31/2006 8:55 AM EDT

According to the latest Florida Trend magazine, in Southeast Florida, Centex (CTX) recently offered discounts of up to $100,000 with Realtor commissions of 6% to spur sales.

Homebuilders have laid off workers, which is not a sign that things will improve any time soon.

Countrywide (CFC) and Washington Mutual (WM) have each closed offices.

My take - Buyers and sellers are playing a game of chicken, where buyers don't make bids, and sellers won't reduce price. As homebuilders flinch, buyers should win the game.

In Tampa Bay condo projects are being downsized and delayed. With speculators gone, the best new condo projects appear to be just 70% sold. Despite this, lenders are still interested in financing new condo projects.

Across the state of Florida sales of existing condos declined 22% during the first quarter. From Bradenton down to Naples sales are off more than 40%.

There are other things to that will effect the market

1- Interest rates, a few years ago when the housing market in these large areas increased, mortgage rates were low, so that offset a little the monthly payment, now both mortgage rates and homes in some areas are on the rise.
So one may get less for their home or one may have to pay a little more but 6.52% is the average interest rate nationally, it does vary state to state, a yr ago it's average was 5.77 this small amount can add $200 in monthly interest costs on a $300,000 mortgage. (add getting less for your home)

2-The mentality of people - When homes were increasing buyers were trying to buy before the prices rose again (This too may effect NC-this fear alone) Now many buyers seeing lower prices are thinking they may come down more, so wait, homes keep dropping in some areas and people still feel they are too high and low balling homes where some sellers feel the price will go up and are not that quick in lowering the amt. Each this is a generalization, many people are are really lowering their prices and the homes still don't sell.



3-The economy and jobs - If consumers are confident with it they will continue to spend and buy homes, if there is a feeling of something will happen, many will stay in areas where they have jobs instead of leaving to an unknown,
also competition among states it getting fierce. While NC still continues to attract many and there is some growth, US Air recently put out bids to 3 states, NC one, AZ another and I forget the third to whomever offers the best tax incentives that is where they will go. Areas like MI, are trying get to companies there given what is going on with the auto industry -

All of this is speculation but this speculation will fuel what will occur next. This entire housing thing varies on opinion from one economist to the other and I think everyone has a fear if I don't buy know will I afford to, if I don't sell now, how much will my price have to drop and all these variable will fuel the future

[thisguy]

Originally Posted by Miker2069

Good post. FL has been beat up pretty badly, and quite honestly, it was bound to happen (it just rose to darn fast it was bound to crash hard). The game of chicken analogy is a good one, and in the end it's to the advantage of the buyer.

Found this amazing article - its about 15 months old

I clipped a few quotes below but its worth reading the whole thing - shows you why people who want to buy a home to LIVE In are getting priced out - so many investors are jumping in. Hence why when people are panicking about NC rising 6% and say "do I need to get in before the explosion in prices" I want to say, have we learned nothing? Just look around the country at what is happening, and yet you want to continue the same mistake by rushing in and buying whatever the builder offers because otherwise you will "miss the train".

p.s. HP makes their dough on the darn ink cartridges!! They can give away the hardware all day and make 80% + on ink!

What I did not realize was how this "mania" is sort of rolling through communities... people are buying in cities they don't live in and buying in MASS... 15-20 homes? The mania in CA allowed people to swap out equity and they moved their equity to Vegas... in 04, then when Vegas had its 60% jump, next they moved to Phoenix late 04/early 05 and when Phoenix had its jump now they are looking for the next big thing (in this article they used Austin as an example) - so its like a rolling mania, going from 1 market to another. YOu can see this sort of speculation in places like Portland now ... it is truly amazing!

http://money.cnn.com/magazines/fortu...1260/index.htm

Just a few blurbs of many I could of taken from this article (written about a 15 months ago)

1) By the time those measures were in place in Phoenix last fall, however, the swarm of investors descending on the city was almost too much to stop. At one of the construction sites of big builder Toll Brothers, a van full of investors from Las Vegas pulled up to a sales trailer shortly after the antispeculation measures had gone into effect. According to a Toll Brothers spokesperson, the saleswoman on call was so flustered by the group's displeasure at being denied an opportunity to invest in such a scalding market that she had to radio headquarters for backup. "They all wanted to buy multiple properties, and they wouldn't take no for an answer," says the spokesperson. "They were trying to climb in and give her their deposits. She had to lock herself in the trailer."

2) Zareh Tahmassebian is on the way to look at two of his houses in Phoenix. He is lost. Most people don't get lost driving to their own residence, but then, Tahmassebian has never actually been to these particular homes. There are a few reasons for that: (1) He has no intention of ever moving into them, (2) he lives in Las Vegas, not Phoenix, and (3) he owns six other houses--and a half share of seven more--in the greater Phoenix area. "Sometimes it's hard to keep track," he says.

Tahmassebian, just 22, is a big, affable guy who dresses the way a budding young speculator should: black trousers, a blue-and-white-striped shirt, cuff links, a Cartier watch, black suede loafers, and rimless purple sunglasses. The son of Armenian immigrants, he has spent the past four years in Las Vegas working as a mortgage banker, a job that he says paid him $250,000 in salary and commissions last year. He has taken the day off to fly to Arizona for a "frame inspection." The houses he's inspecting are somewhere inside the Cholla Ranch development that's being put up by KB Home, one of the nation's largest builders. Right now he's in the general area--but lacking specifics. "Is that Tempe?" he asks. "I think I have some houses there."

When we finally arrive at the first construction site, on Paradise Lane, Tahmassebian begins his inspection. "See this wood?" he says, gesturing to the slatted frame of the unfinished house. "This wood made money for me! I don't own it--but I own the rights. I put a 10% deposit down, I haven't even made a mortgage payment yet, and it's already gone up $45,000. What a country!"

3) On several occasions Tahmassebian has even found himself at the grand opening of a community--an event typically reserved for "end users," as the builders like to refer to people who actually plan to take up residence. The openings are sales events where hopeful buyers are invited to gather with their families for a lottery in which the lucky new homeowners are selected. In oversubscribed communities the lotteries can get tense. Elsewhere, they take on the quality of a new-community pep rally. When a winner is chosen, the lucky family's name goes up on the board. They get a button. Someone takes a picture. Everyone applauds

[thisguy]

Originally Posted by Weis02

There are other things to that will effect the market

1- Interest rates, a few years ago when the housing market in these large areas increased, mortgage rates were low, so that offset a little the monthly payment, now both mortgage rates and homes in some areas are on the rise.
So one may get less for their home or one may have to pay a little more but 6.52% is the average interest rate nationally, it does vary state to state, a yr ago it's average was 5.77 this small amount can add $200 in monthly interest costs on a $300,000 mortgage. (add getting less for your home)

2-The mentality of people - When homes were increasing buyers were trying to buy before the prices rose again (This too may effect NC-this fear alone) Now many buyers seeing lower prices are thinking they may come down more, so wait, homes keep dropping in some areas and people still feel they are too high and low balling homes where some sellers feel the price will go up and are not that quick in lowering the amt. Each this is a generalization, many people are are really lowering their prices and the homes still don't sell.



3-The economy and jobs - If consumers are confident with it they will continue to spend and buy homes, if there is a feeling of something will happen, many will stay in areas where they have jobs instead of leaving to an unknown,
also competition among states it getting fierce. While NC still continues to attract many and there is some growth, US Air recently put out bids to 3 states, NC one, AZ another and I forget the third to whomever offers the best tax incentives that is where they will go. Areas like MI, are trying get to companies there given what is going on with the auto industry -

All of this is speculation but this speculation will fuel what will occur next. This entire housing thing varies on opinion from one economist to the other and I think everyone has a fear if I don't buy know will I afford to, if I don't sell now, how much will my price have to drop and all these variable will fuel the future

Good points but they apply more to people who actually want to live in their homes. Much (not all) of the problem has been the added demand that speculators have added... in a normal housing market you have X amount of buyers and Y amount of houses = and price point ABC. But when you add another 20% (speculators) on top of the X amount of buyers, than ABC prices rises considerably.

Anyhow, real estate is regional. And even a 6.5% rate is low by historical standards. For speculators using interest only - they don't care if the payment is $1800 a month or $2100 a month, as long as they can get their 35% appreciation in 18 months on the $400K home. It pays for itself.

Now the question is what markets are left that they can get this level of appreciation? I see Portland has spiked lately - maybe Colorada will be one since people from CA can fly in and out easy, maybe places like Nashvile or Carolinas will see this speculation (hope not). It is as someone else said just a pyramid scheme (sell to the greater fool), buy for whatever the price, hope to sell for whatever the price + 30%. In the article I just posted one of the guys didn't even know what he paid for the house... this is the exact replica of the stock market boom and bust in late 90s, just with homes.

I was glad to see builders taking some MINIMUM action and trying to put in some clauses into the contract language to avoid some speculation but as with everything there are ways around it, but at least it slows things down a bit.

[Miker2069]

Originally Posted by scottinmass

Mike, what your saying is stay another year in Mass and then get a good deal on a new house because the builder will have too much inventory?

Scott

No not quite. Just reenforcing the idea that one shouldn't panic about missing "good home prices" down south, particularly if your projected move is at least 6 months out. As thisguy said, there shouldn't be a lot of hand ringing on this. Although the anxiety is understandable, given the last 5 year "jacking up of prices". NC has shown no signs of this, however prices will tick up, but at a rate that most should be able to keep up with.

I always wondered if I bought my home 2 years ago, what deal I could have gotten- just 20/20 hindsight stuff. But I'm happy with the purchase and what I paid.

[Miker2069]

Originally Posted by thisguy

Found this amazing article - its about 15 months old

I clipped a few quotes below but its worth reading the whole thing - shows you why people who want to buy a home to LIVE In are getting priced out - so many investors are jumping in. Hence why when people are panicking about NC rising 6% and say "do I need to get in before the explosion in prices" I want to say, have we learned nothing? Just look around the country at what is happening, and yet you want to continue the same mistake by rushing in and buying whatever the builder offers because otherwise you will "miss the train".

p.s. HP makes their dough on the darn ink cartridges!! They can give away the hardware all day and make 80% + on ink!

What I did not realize was how this "mania" is sort of rolling through communities... people are buying in cities they don't live in and buying in MASS... 15-20 homes? The mania in CA allowed people to swap out equity and they moved their equity to Vegas... in 04, then when Vegas had its 60% jump, next they moved to Phoenix late 04/early 05 and when Phoenix had its jump now they are looking for the next big thing (in this article they used Austin as an example) - so its like a rolling mania, going from 1 market to another. YOu can see this sort of speculation in places like Portland now ... it is truly amazing!

http://money.cnn.com/magazines/fortu...1260/index.htm

Just a few blurbs of many I could of taken from this article (written about a 15 months ago)

1) By the time those measures were in place in Phoenix last fall, however, the swarm of investors descending on the city was almost too much to stop. At one of the construction sites of big builder Toll Brothers, a van full of investors from Las Vegas pulled up to a sales trailer shortly after the antispeculation measures had gone into effect. According to a Toll Brothers spokesperson, the saleswoman on call was so flustered by the group's displeasure at being denied an opportunity to invest in such a scalding market that she had to radio headquarters for backup. "They all wanted to buy multiple properties, and they wouldn't take no for an answer," says the spokesperson. "They were trying to climb in and give her their deposits. She had to lock herself in the trailer."

2) Zareh Tahmassebian is on the way to look at two of his houses in Phoenix. He is lost. Most people don't get lost driving to their own residence, but then, Tahmassebian has never actually been to these particular homes. There are a few reasons for that: (1) He has no intention of ever moving into them, (2) he lives in Las Vegas, not Phoenix, and (3) he owns six other houses--and a half share of seven more--in the greater Phoenix area. "Sometimes it's hard to keep track," he says.

Tahmassebian, just 22, is a big, affable guy who dresses the way a budding young speculator should: black trousers, a blue-and-white-striped shirt, cuff links, a Cartier watch, black suede loafers, and rimless purple sunglasses. The son of Armenian immigrants, he has spent the past four years in Las Vegas working as a mortgage banker, a job that he says paid him $250,000 in salary and commissions last year. He has taken the day off to fly to Arizona for a "frame inspection." The houses he's inspecting are somewhere inside the Cholla Ranch development that's being put up by KB Home, one of the nation's largest builders. Right now he's in the general area--but lacking specifics. "Is that Tempe?" he asks. "I think I have some houses there."

Another good post. We should also see what happens to these guys when it crashes. My father, who looks at properties in FL, mostly for rentals (duplexes, triplexes, etc.), met many investors in the central FL area. All said "make me an offer". All were at risk of defaulting, probably causing a cascading effect.

Pheonix I believe topped out 1-2 years ago. A buddy of mine moved out there a couple years and he bought at the top. I ribbed him a bit about it, but, he's not worried b/c he's not moving anytime soon.

Anyway, this really is irrelevant to some extent unless you are planning to be an investor and want double digit appreciation. If you actually intend to "live in the house for some extended period of time", then what does it matter?

Incidentally it sounds like Tahmassebian is a student of Carlton Sheets. The flip side is you never here of the people who try the no money down, fake it till you make it approach, and lose their shirts. I listen to an nationally syndicated money show, and I hear those people call in all the time. But I do agree with Tahmassebian, it is a great country!

[a1m1700]

Originally Posted by thisguy

Found this amazing article - its about 15 months old

I clipped a few quotes below but its worth reading the whole thing - shows you why people who want to buy a home to LIVE In are getting priced out - so many investors are jumping in. Hence why when people are panicking about NC rising 6% and say "do I need to get in before the explosion in prices" I want to say, have we learned nothing? Just look around the country at what is happening, and yet you want to continue the same mistake by rushing in and buying whatever the builder offers because otherwise you will "miss the train".



What I did not realize was how this "mania" is sort of rolling through communities... people are buying in cities they don't live in and buying in MASS... 15-20 homes? The mania in CA allowed people to swap out equity and they moved their equity to Vegas... in 04, then when Vegas had its 60% jump, next they moved to Phoenix late 04/early 05 and when Phoenix had its jump now they are looking for the next big thing (in this article they used Austin as an example) - so its like a rolling mania, going from 1 market to another. YOu can see this sort of speculation in places like Portland now ... it is truly amazing!

http://money.cnn.com/magazines/fortu...1260/index.htm

Just a few blurbs of many I could of taken from this article (written about a 15 months ago)

1) By the time those measures were in place in Phoenix last fall, however, the swarm of investors descending on the city was almost too much to stop. At one of the construction sites of big builder Toll Brothers, a van full of investors from Las Vegas pulled up to a sales trailer shortly after the antispeculation measures had gone into effect. According to a Toll Brothers spokesperson, the saleswoman on call was so flustered by the group's displeasure at being denied an opportunity to invest in such a scalding market that she had to radio headquarters for backup. "They all wanted to buy multiple properties, and they wouldn't take no for an answer," says the spokesperson. "They were trying to climb in and give her their deposits. She had to lock herself in the trailer."

2) Zareh Tahmassebian is on the way to look at two of his houses in Phoenix. He is lost. Most people don't get lost driving to their own residence, but then, Tahmassebian has never actually been to these particular homes. There are a few reasons for that: (1) He has no intention of ever moving into them, (2) he lives in Las Vegas, not Phoenix, and (3) he owns six other houses--and a half share of seven more--in the greater Phoenix area. "Sometimes it's hard to keep track," he says.

Tahmassebian, just 22, is a big, affable guy who dresses the way a budding young speculator should: black trousers, a blue-and-white-striped shirt, cuff links, a Cartier watch, black suede loafers, and rimless purple sunglasses. The son of Armenian immigrants, he has spent the past four years in Las Vegas working as a mortgage banker, a job that he says paid him $250,000 in salary and commissions last year. He has taken the day off to fly to Arizona for a "frame inspection." The houses he's inspecting are somewhere inside the Cholla Ranch development that's being put up by KB Home, one of the nation's largest builders. Right now he's in the general area--but lacking specifics. "Is that Tempe?" he asks. "I think I have some houses there."

When we finally arrive at the first construction site, on Paradise Lane, Tahmassebian begins his inspection. "See this wood?" he says, gesturing to the slatted frame of the unfinished house. "This wood made money for me! I don't own it--but I own the rights. I put a 10% deposit down, I haven't even made a mortgage payment yet, and it's already gone up $45,000. What a country!"

3) On several occasions Tahmassebian has even found himself at the grand opening of a community--an event typically reserved for "end users," as the builders like to refer to people who actually plan to take up residence. The openings are sales events where hopeful buyers are invited to gather with their families for a lottery in which the lucky new homeowners are selected. In oversubscribed communities the lotteries can get tense. Elsewhere, they take on the quality of a new-community pep rally. When a winner is chosen, the lucky family's name goes up on the board. They get a button. Someone takes a picture. Everyone applauds

In AZ We had the chance to purchase a 3800 sqft beautiful Standard Pacific home for 280,000, huge spiral staircase, this was before the lotteries, it came with tile and granite 4cg lots of bells and whistles plus 10,000 in incentives, plus 3% husbands RE commission. It was in a great Gilbert location ,we decided not to do it, we thought it was too much money. This was July 2004 by the time it would have been built May 2005 they were selling for 599,000. Miss the boat? YES
Gotten over it? NO

[a1m1700]

Originally Posted by a1m1700

In AZ We had the chance to purchase a 3800 sqft beautiful Standard Pacific home for 280,000, huge spiral staircase, this was before the lotteries, it came with tile and granite 4cg lots of bells and whistles plus 10,000 in incentives, plus 3% husbands RE commission. It was in a great Gilbert location ,we decided not to do it, we thought it was too much money. This was July 2004 by the time it would have been built May 2005 they were selling for 599,000. Miss the boat? YES
Gotten over it? NO

Been to those lotteries, after I missed the boat but never got my name pulled. Some people are not that nice and clap some do. I always did

Seen this same couple from California come every weekend they got their name pulled the 5th week.

[a1m1700]

Originally Posted by Miker2069

Another good post. We should also see what happens to these guys when it crashes. My father, who looks at properties in FL, mostly for rentals (duplexes, triplexes, etc.), met many investors in the central FL area. All said "make me an offer". All were at risk of defaulting, probably causing a cascading effect.

Pheonix I believe topped out 1-2 years ago. A buddy of mine moved out there a couple years and he bought at the top. I ribbed him a bit about it, but, he's not worried b/c he's not moving anytime soon.

Anyway, this really is irrelevant to some extent unless you are planning to be an investor and want double digit appreciation. If you actually intend to "live in the house for some extended period of time", then what does it matter?

Incidentally it sounds like Tahmassebian is a student of Carlton Sheets. The flip side is you never here of the people who try the no money down, fake it till you make it approach, and lose their shirts. I listen to an nationally syndicated money show, and I hear those people call in all the time. But I do agree with Tahmassebian, it is a great country!

Phoenix topped out August 2005, I sholuld have sold then, so far I'm down about 40,000 but up because the market here is over inflated anyway.

My brother in sister in-law bought July 2005 paid 525,ooo for their house they could probably get 480,000 now

[TornadoAlley]

Originally Posted by a1m1700

In AZ We had the chance to purchase a 3800 sqft beautiful Standard Pacific home for 280,000, huge spiral staircase, this was before the lotteries, it came with tile and granite 4cg lots of bells and whistles plus 10,000 in incentives, plus 3% husbands RE commission. It was in a great Gilbert location ,we decided not to do it, we thought it was too much money. This was July 2004 by the time it would have been built May 2005 they were selling for 599,000. Miss the boat? YES
Gotten over it? NO

Agree. We missed the boat too. About $60k worth of it. BUMMER!

[thisguy]

Originally Posted by a1m1700

Been to those lotteries, after I missed the boat but never got my name pulled. Some people are not that nice and clap some do. I always did

Seen this same couple from California come every weekend they got their name pulled the 5th week.

I never heard about such things as "lotteries" until reading this story ... but now that I know about them, I will know when you start hearing about them, sell your house in within 6 months and go live in an apartment for 2-3 years while the market crumbles around you

Thats the thing about even a correction - the person who bought that $289K home, and now its worth say $550K... even if the market corrects 20% from here, the house is STILL worth $440K after a 20% correction. So as long as you did not buy in the TAIL END of the bubble you still will do ok if you plan to live in the house. The main problem is the speculators who cannot take a flat market not to mention a falling market, so their flipping methods become moot and they will get desperate to unload their 9th, 10th, 11th home to stay solvent. This will create opportunities for people with cash to buy these homes, but also potentially drive down values below where they should be if enouhg of the market is these speculators. That said, most of these markets are overpriced relative to incomes of people so 20% down is still not going to make it easy for a flood of new buyers to enter the market (people who actually want to live in the homes). A payment on a $440K house (post
"correction") is very different than a $289K house. That is why the next 12-24 months will be very interesting. Correction could be far worse than anticipated in some areas, while other areas of the country that never had the rampant speculation will just go humming along since overall economy is still in good shape and people have jobs. Most home busts are due to recession and loss of jobs - this is the first (potential) one that is a direct result of rampant speculation and total inability for people with "normal" mortgages and "normal" incomes to be able to afford a home in these cities.