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Of course, I understand it's an opinion so read it and guage these things for yourself...
I DO think housing is far from a bottom given various fundamentals but I also think that housing will continue declining at a snails pace over the next 5 years.
The HELOC boom began in 2003. Most of these revolving lines of credit were interest-only loans for the first ten years. After that, they convert into 15-year fully amortizing loans. This means that beginning next year, these loans start to transform into a fully-amortizing loan. The number of HELOCs which do this increases in 2014 and even more in 2015 and 2016.
Last edited by ducviloxi; 05-30-2012 at 02:51 PM..
Of course, I understand it's an opinion so read it and guage these things for yourself...
I DO think housing is far from a bottom given various fundamentals but I also think that housing will continue declining at a snails pace over the next 5 years.
The HELOC boom began in 2003. Most of these revolving lines of credit were interest-only loans for the first ten years. After that, they convert into 15-year fully amortizing loans. This means that beginning next year, these loans start to transform into a fully-amortizing loan. The number of HELOCs which do this increases in 2014 and even more in 2015 and 2016.
I have read other articles on this subject. It is going to be another hiccup for sure, not sure about a "collapse."
I have recently seen several homes sell at or below the county appraisers value which is typically a low number. In the boom a house assessed for 500K would sell for 750K and nobody would bat an eyelash! Now that 500K house is selling for 450K and it is the new norm.
The premise of this, like many alarmist Business Insider "sky is falling " doom rants is erronous on so many levels...
The vast majority of people who took out HELOCs were not looking to over-leverage themselves the way that wild-eyed sub-prime borrowers were driven into a frenzy, they simply realized that it was cheaper to use some equity instead of traditional revolving loans or installment loans.
The odds of folks en-mass defaulting on HELOCs is remote. Even if that happens the lender, being in second position, would have little leverage to force out borrowers. Folks with modest firsts and still not horrendously upside down WON'T be so stupid to play "jingle mail" as idiots in the past did.
Without the defaults there WON'T be massive devaluations.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Oddly, here there are multiple offers above asking price on all homes under about $600,000, and I have heard from people in the SF Bay Area that it's the same there. According to the various real estate sites our value has gone up 11-15% in the last two months.
Historically median home values have been near 2.5X median household income. Looking just at the Nashville market with median home values at 160,000 and median household income at 48,500 you can see housing is overvalued considerably.
We are going to see median household decline in the next couple of decades; how can that help housing values?
Why do I say we will see a decline? Technology reducing the labor requirements and outsourcing of labor intensive production to the third world.
Yes, the highly skilled and trained worker will likely see wages increase however housing values depend on the macro-labor market.
If anyone expects a housing recovery with the growth in part time service sector jobs or the "new normal" 8 to 12 dollar an hour factory work they are not thinking right.
Oddly, here there are multiple offers above asking price on all homes under about $600,000, and I have heard from people in the SF Bay Area that it's the same there. According to the various real estate sites our value has gone up 11-15% in the last two months.
San Fran is not a typical market... Check that same story in Vegas? Phoenix? Florida?
My parent's home is now above (not by much) what it was pre-bubble burst. That didn't take long.
The difference with the current bubble is that it's no secret. Any competent common person is cashing in on it.
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