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In my census tract, anything listed goes pending in a week or less unless it’s a problem property or priced way beyond the market. The only houses on the market under $1 million have been listed 5 days or less.
It's not going to happen overnight for sure but it will be interesting to see what happens and when.
What do you mean “it’s” not going to happen overnight? Foreclosures? I still doubt that there will be more foreclosures that result in prices going down. It will need to be the other way around IMO. Prices will need to come down first, and then more people will go into foreclosure. Right now there’s not really a reason for anyone to go into foreclosure because if they can’t make the payments they should be able to sell and pay off what they owe with the equity (but like I said I wouldn’t be surprised to see that happen which would still increase supply and potentially lower prices).
But I agree it will be interesting to see what happens overall. But the way I see it, even if prices drop 20% or so, that basically just puts them back to what they were like 2 years ago. So the only people that would be underwater would be those that bought in that time period. And due to the crazy market, many of those people put a lot of money down so shouldn’t have much incentive to walk away from their houses or anything, especially if interest rates go up and they have a lower rate.
It’ll crash and there will be many forclosures and a ton of inventory coming onto the market. The need to live in rural areas will pass and people will realize that being far away from the action sucks. City living will begin to come back into style. Businesses are realizing that teleworking pretty much translates to “tele-not doing crap and getting paid” and returning to the office will become the standard.
Interestingly, the Biden administration wants more people in houses so the FHA is loosening standards in how high student loan debt is weighted when applying for a mortgage. It's also lowering credit requirements.
It has to do with income driven repayment loans. Recap of article: If you have $200,000 in student loans, it was assumed your repayment was 1% or $2,000/month. However, borrowers are entering into income-driven repayment plans where they might only have to pay $300/month (because of your income) and the balance is forgiven after 20-25 years.
I used a loan simulator and if I had $200,000 in loans, $50,000/year, 5% increases in income per year, I'd pay between $257-803 until 2041. I'd pay off 116,888 and 185,666 would be forgiven.
While the loan simulator has some issues right now, this is exactly how I've been doing things. I have north of $233k in loans (principle and interest) remaining, primarily consisting of law school debt. I'm enrolled in an income driven repayment plan. Being military, only my base pay is considered as income for tax/loan repayment purposes; the generous monthly tax free housing and sustenance payments are not counted as income. Thus, my repayments have been much less than they would have been for someone taking home a similar amount of money after taxes.
When I bought my place back in 2016, my lender didn't take the principle balance into account much, but rather the monthly payment, which was around $220 . . . thus, in my experience, this isn't a new thing. For context, I qualified for a $600k loan at the time and bought a condo for $469k. The fact that I haven't been making payments on my loans for over a year due to the Covid-pause notwithstanding, my current payment obligation is around $320 a month.
Note, I'm enrolled in the Public Service Loan Forgiveness program, so only expect to continue making loan payments until the Fall of 2025, which will be here before you know it. In other words, considering that the current Covid-pause in loan repayment runs through September of 2021, I'll have less than 4 years of income driven payments to make until my loans are forgiven.
As long as the income driven repayment plan is a thing, I do think that lenders should continue to take how much your monthly payment obligation actually is into account as opposed to how much you owe when deciding whether to give you a mortgage.
It’ll crash and there will be many forclosures and a ton of inventory coming onto the market. The need to live in rural areas will pass and people will realize that being far away from the action sucks. City living will begin to come back into style. Businesses are realizing that teleworking pretty much translates to “tele-not doing crap and getting paid” and returning to the office will become the standard.
Aren’t a lot of city markets already pretty hot too though?
I moved to S. NH (Seacoast region) in 2015 where houses like mine were selling in the $370's. Now, similar houses are selling for around $475. I have a search on one of the R.E. sites for 6 or 8 towns in this area. Most of the listings are marked pending w/in a few days. In bleeping NH! I can only imagine that the Boston area has gone even more insane than when I left. Also D.C. area, nice towns in N.NJ, etc.
Really high quality towns & areas rarely go down much in my experience. They might level off for awhile during a recession.....
Again, short memories. It’s never “one thing” that causes or prevents a market from collapsing. It’s a series of things, left unchecked, that conspire to exacerbate existing structural weaknesses in the market. In 2008, it wasn’t just subprime loans; there were multiple factors that had been building for years and contributed to the collapse. It will be the same with 2022. There are numerous large, rapidly expanding cracks in the real estate market. It would take a policy miracle to patch them all simultaneously and keep the market from crashing.
Clearly some Ultra High Net Worth Individuals (UHNWI) employ mortgages and some do not; it is employing leverage, and some people are more comfortable employing leverage than others. It is about personal risk tolerance rather than net worth.
It also depends on whether one regards one's primary residence as a consumption-item or an investment-asset. If, after maintenance and insurance and other running-costs, after decades of ownership the house has outpaced inflation, then arguably it's an asset. If not, not. To borrow money to buy an asset makes sense. To borrow to indulge in an expense, makes less sense.
Quote:
Originally Posted by RationalExpectations
...you can design a portfolio with the same expected return as 100% equities but with a lower quantity of risk, or you can design a portfolio with the same quantity of risk as 100% equities but with a higher expected return.
Why would people walk away if they're locked in before rates rise (which I also think they will)? Being underwater only matters if you're selling or tapping the house equity to live, no?
Opportunity.
The house I'm in was a foreclosure. The previous owner bought it in 2007 and it was foreclosed on in 2009. They paid about $100k more than it was worth.
According to my neighbors, they were well off and could make the payments but walked because they were able to buy a new place after the crash for a really good price and got away from being $100k underwater.
While the loan simulator has some issues right now, this is exactly how I've been doing things. I have north of $233k in loans (principle and interest) remaining, primarily consisting of law school debt. I'm enrolled in an income driven repayment plan. Being military, only my base pay is considered as income for tax/loan repayment purposes; the generous monthly tax free housing and sustenance payments are not counted as income. Thus, my repayments have been much less than they would have been for someone taking home a similar amount of money after taxes.
When I bought my place back in 2016, my lender didn't take the principle balance into account much, but rather the monthly payment, which was around $220 . . . thus, in my experience, this isn't a new thing. For context, I qualified for a $600k loan at the time and bought a condo for $469k. The fact that I haven't been making payments on my loans for over a year due to the Covid-pause notwithstanding, my current payment obligation is around $320 a month.
Note, I'm enrolled in the Public Service Loan Forgiveness program, so only expect to continue making loan payments until the Fall of 2025, which will be here before you know it. In other words, considering that the current Covid-pause in loan repayment runs through September of 2021, I'll have less than 4 years of income driven payments to make until my loans are forgiven.
As long as the income driven repayment plan is a thing, I do think that lenders should continue to take how much your monthly payment obligation actually is into account as opposed to how much you owe when deciding whether to give you a mortgage.
Could you still afford your payments during the “covid pause”?
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