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The media have been talking about a RE bubble bursting for several years. About two years ago a friend decided to sell and buy a bigger house. When he sold his neighbor was convinced that the bubble was about to burst so he sold his house and decided to rent and wait. The house sold for just around $400k and my friend bought a bigger house for $550k. Now my friend’s house is worth about $950k and his old house is around $650k. His brilliant neighbor who is still waiting for the bubble to burst has lost about $250k in appreciation and he is still renting.
The last real estate “bubble” where houses lost value was in the early to mid 90’s. In Orange County, CA it was about a 21% loss. This was due to a recession and the loss of several hundred thousand high paying aerospace jobs. It’s not likely that another recession like that is going to happen anytime soon. If it did and houses lost 21% then if you had purchased two years ago you would still be ahead. Of course if you bought now and prices dropped then you would be upside down until the house appreciated again.
If you are banking on adjustable loans being the killer of the RE market I wouldn’t bank on it. There have always been adjustable loans, but I can’t remember them ever being the reason for a housing crash. The fed raised rates all through out the late 90’s, but that didn’t kill the RE market in fact it enjoyed record appreciation. Even through out the 2000 recession RE appreciated.
I do think we are in for an adjustment, but I doubt it will be anything more than no appreciation for this year and modest 2-3% a year for a couple of years.
If you are waiting for homeowners to give their houses away because of a slow market you are in for a long wait.
Oh....this will be much worse than the 90's........foreclosures are already skyrocketing in California.....peoples incomes are not keeping up with prices...that's the issue. They won't be giving there homes away...they will have their homes TAKEN away. You can't really compare California to NC anyway.
the overall economy is similar to what you noted above, the cost of living in most areas in sky-rocketing and salaries are not keeping pace...the fed has raised the interest rate 17x trying to control inflation...
While NY is not as extreme as CA, it generally follows the same path...and the other issue too is when houses here rose, so many took out equity to redo their homes and now probably owe more then their house is worth and can't sell or get out even if they wanted to -
They already exist in some markets. 50 years ... absolutely ridiculous. NO ONE needs to own a house that bad (not even me and I speak as a mother who grew up in apartments and desperately wants to put her children in a house). Imagine never building equity, never getitng the opportunity to own your house ... 50 years sounds like more of a sentence than mortgage terms to me.
They already exist in some markets. 50 years ... absolutely ridiculous. NO ONE needs to own a house that bad (not even me and I speak as a mother who grew up in apartments and desperately wants to put her children in a house). Imagine never building equity, never getitng the opportunity to own your house ... 50 years sounds like more of a sentence than mortgage terms to me.
SL
I heard of 40 yr. mortgages. Now there's a 50 yr. mortgage? Nice house and property pictures. I have a friend who only pays the interest on their mortgage, and now their rates have gone up and can only afford to pay the interest. Not good.
They already exist in some markets. 50 years ... absolutely ridiculous. NO ONE needs to own a house that bad (not even me and I speak as a mother who grew up in apartments and desperately wants to put her children in a house). Imagine never building equity, never getitng the opportunity to own your house ... 50 years sounds like more of a sentence than mortgage terms to me.
SL
I so agree - imagine a 50 yr mortgage - ( i only have 17 yrs left on mine and when I move, if I take out a mortage it will only be for 15 yrs)
many seniors now are taking out reverse mortgages just to live - so essentially the only ones who really own our homes are the banks..
I heard of 40 yr. mortgages. Now there's a 50 yr. mortgage? Nice house and property pictures. I have a friend who only pays the interest on their mortgage, and now their rates have gone up and can only afford to pay the interest. Not good.
Well what typically happens if the loans is interest only for a certain amt of yrs and the premise behind it is to try and also pay some off the principal too..most can't do this, so now as these come due, not only is interest due but the principal too and is why so many can't afford it, the payment is huge...
Also to add, for those trying to keep their homes, they use their cash from salary to pay their mortgages and credit cards for everything else, consumer debt is also on the rise..
Sure, I rent. It beats stressing over payment in Orange County. ...
OK I guess I need to get some more coffee...for most of this thread, I thought you were talking about Orange County, North Carolina...and when I saw you said you paid $1800/month in rent I about fell outta my chair!!
LOL. (Now granted, I have seen condos in the greater Triangle area near that, but they're usually ultra-luxury places.)
Heh. OK...Orange County, CA. Now I get it.
OK I guess I need to get some more coffee...for most of this thread, I thought you were talking about Orange County, North Carolina...and when I saw you said you paid $1800/month in rent I about fell outta my chair!!
LOL. (Now granted, I have seen condos in the greater Triangle area near that, but they're usually ultra-luxury places.)
Heh. OK...Orange County, CA. Now I get it.
thats nothing, 1 studio apt in NYC in a decent area is probably over $2k a month -
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