Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I really curious what the thought process was for people that purchased homes near the peak of the housing bubble in the bubble markets. I really don't understand why anybody would do it! Even with a modest down payment the monthly costs far exceeded the cost to rent a comparable property. Was everyone just gambling? Was it ignorance? What?
Note, I'm not talking about people that purchased homes in areas that have reasonably priced houses a couple of years ago. Just the bubble markets like Florida, California, Nevada etc.
Maybe they were trying to get into a home before it got any higher and they couldn't. Most people want to own their own home eventually is why I think
Don't know when the "peak" is until you are looking at in your rear view mirror......Kind of like the bottom, I can tell you when the bottom is AFTER we start climbing up.....
I believe most people didn't buy on greed. They bought on fear. They bought because they thought if they couldn't afford a home in 2005, they'd never be able to afford one.
.
I agree. That's what I saw in the area I lived (Utah). I worked in the building dept of a city and people just want to get a home because the prices of building lots were skyrocketing and they wanted to get a home before it got any higher.
When I heard about adjustable rates it seemed like a scam to me-- obvious "too good to be true" stuff. They wouldn't offer it if there wasn't an upside for the bank and the upside was they get more money when the rates go up no matter how much they go up. /quote]
Actually, the concept of adjustable rates has been around as long as people have been financing homes. Pre the Great Depression, most folk needed 50% down and mortgages matured in 5 years where they had to be paid off or refinanced at current rates.
The concept of 30 year fixed rate mortgages came out of the New Deal, during the depression, when the U.S. Government got into the business of insuring, guaranteeing and securitizing loans.
ARMS became popular again in the 80's when interest rates were 20%.
No one ever imagined then that the Fed Funds rate would, one day, be in effect, a negative number, as it was post 9/11. This expanded credit, around the world. While the fixed rates for 30 year maturities do not correlate to the Federal Funds rate, short tem teaser ARM money does.
We'll never know what might have been the outcome if rates had not been so drastically reduced, post 9/11 just as we won't know what if, had we not sent troops to the middle east.
Because there is no sign in the front yard declaring
"This is the peak, wait until tomorrow." If you could read tomorrows paper today, you would be a billionaire..!
There were many such signs and that is just the point. The signs were blinking in neon red, but people ignored them. Why? What psychologically speaking drove people into real estate mania? Why did average people get involved in real estate speculation?
Although it may be true for some people that they thought they were going to get "priced out forever" and purchased an over priced home, but the record levels of foreclosure/defaults show that many were purchasing homes they couldn't hope to afford.
There were many such signs and that is just the point. The signs were blinking in neon red, but people ignored them. Why? What psychologically speaking drove people into real estate mania? Why did average people get involved in real estate speculation?
Although it may be true for some people that they thought they were going to get "priced out forever" and purchased an over priced home, but the record levels of foreclosure/defaults show that many were purchasing homes they couldn't hope to afford.
I'd wager that none of those types of buyers are on this forum.
You know the more telling question is "why didn't more people sell at the peak".
One of the symptoms of the peak, was that there was so little inventory on the market. Builders were working 7 days a week to keep up with the demand, while many of the home owners that are, or were, on the market now that the bust has come, wouldn't even think about selling.
You know the more telling question is "why didn't more people sell at the peak".
One of the symptoms of the peak, was that there was so little inventory on the market. Builders were working 7 days a week to keep up with the demand, while many of the home owners that are, or were, on the market now that the bust has come, wouldn't even think about selling.
That's what I don't get. We sold FL waterfront 3 years ago and told all of our friends, neighbors, and even our realtor that they would be able to buy back for less money. At the time, they all thought their houses were going to increase 100k every year. "Now" a lot of our old neighbors are in trouble and they don't know what to do. A few are in foreclosure. They even call for help but it's too late. They missed the boat.
I can tell you why we bought in early 2006. We relocated to another state, anticipated we would stay there a long time, were fairly young buyers (late 20s/early 30s) and this was our 2nd house. We were not advised by parents or anyone else that the market was at it's peak and to wait. We weren't buying in a huge bubble area (30 mi. SE of Seattle) and the prices were more expensive than where we were moving from in Utah but didn't seem extreme for what we were looking for. We had no reason to believe that prices would not at least hold, if not continue to steadily increase. We also believed we would be there 4-5 years so figured if prices fluctuated somewhat we would be ok to weather it out.
Unfortunately, I discovered I have SAD (seasonal affective disorder) and was very unhappy living there. Things didn't work out in other ways that we didn't anticipate as well. We felt we needed to move back to our home state. And we are biting the bullet and losing some money by selling now. We did learn a valuable lesson and wish we would have rented instead of bought during that time. But we honestly figured that it wouldn't be too difficult to sell and we'd at least not lose any money if we needed to sell. We didn't know that the market was going to dive around the nation, causing our area to have problems as well. I'm sure there are many others who are/have been in similar circumstances when they bought. Buying our house had nothing to do with greed, we were not planning on making a bunch of money off of it. And it was well within our means and we got a 30 year fixed loan. We thought we were very prudent, conservative buyers and had no idea this could happen to us. We just wanted a nice place to live in a nice area and it fit our needs well.
I think people felt the prices were just going to continue to go up and up so they were desperate to buy before that happened.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
.
