How's your housing market? (1 Viewer)

[tommyGunZ]

As for real estate in general, I think this will be a 'average' year. Not average over the last 5 years but average for the last 30 years.

Not so much of an average year.

just giving you a hard time bro.

 

[Chadstroma]

As for real estate in general, I think this will be a 'average' year. Not average over the last 5 years but average for the last 30 years.

Not so much of an average year.

just giving you a hard time bro.

I know... not afraid to admit when I am wrong though. Certainly could use a drink or two..... or three or four.....

 

[scottybo]

Probably one of the only bright spots in the country is Mobile, Alabama and nearby surrounding cities/towns. Our economy is booming and will have at least 8,000 new jobs created by 2010.

 

[snitwitch]

More gloomy news from the Bay Area, though SF and other wealthy areas appear to be holding on -- sales down less and median prices ticking upwards.

Another record low for Bay Area home sales

Carolyn Said, Chronicle Staff Writer

Thursday, April 17, 2008

(04-17) 11:19 PDT SAN FRANCISCO -- The housing crisis showed no signs of abating during the traditional start of the spring selling season, as Bay Area home sales clocked another record low month in March, according to a real estate report released today.

In the nine-county area, 4,898 new and resale homes and condos changed hands, down 41.1 percent from 8,317 in March 2006, according to DataQuick Information Systems, a La Jolla real estate information service. One-quarter of the sold homes previously had been repossessed in foreclosures. Banks usually sell such homes at a discount, which further depresses prices, particularly in their immediate neighborhoods.

The Bay Area median price for all homes tumbled 16.1 percent to $536,000 from last year's $639,000. The median is now 19.4 percent off its peak of $665,000 which was reached last June and July.

DataQuick said this was the slowest March since it began tracking statistics in 1988, and the seventh consecutive month of record lows.

As has consistently been the case, several counties - notably those close to job centers and in affluent areas - were in better shape. In San Francisco, the median price inched up to $755,000, up 0.3 percent from last year - the only county where the median grew. Sales in San Francisco were down 20.6 percent versus last year, a modest drop compared to the 47.2 percent decline in Alameda County, for example. San Mateo and Marin counties saw their medians slip about 4 percent, compared with the double-digit declines of the six other counties.

"Other parts of the state have been hit harder by the downturn in the housing market than the Bay Area," said Marshall Prentice, DataQuick president, in a statement. "Most of the distress is in areas that absorbed spillover activity during the 2004 and 2005 frenzy. for themost part that's the Central Valley and inland Southern California. It still appears that a lot of Bay Area activity is just on hold, waiting for the mortgage markets to open back up."

Although Congress raised the limits for so-called "jumbo" loans earlier this year, those changes are not yet reflected in the March results. Mortgages above the $417,000 jumbo limit accounted for only 29.8 percent of sales in March, compared with 62.2 percent a year ago. If jumbos had been more widely available, the median would have been closer to $597,000, DataQuick said.

Mortgage brokers and borrowers have reported that the higher limits - to as much as $729,750 in high-cost regions like the Bay Area - have not yet been reflected in lower interest rates.

 

[OC Zed]

More gloomy news from the Bay Area, though SF and other wealthy areas appear to be holding on -- sales down less and median prices ticking upwards.

Another record low for Bay Area home sales

Carolyn Said, Chronicle Staff Writer

Thursday, April 17, 2008

(04-17) 11:19 PDT SAN FRANCISCO -- The housing crisis showed no signs of abating during the traditional start of the spring selling season, as Bay Area home sales clocked another record low month in March, according to a real estate report released today.

In the nine-county area, 4,898 new and resale homes and condos changed hands, down 41.1 percent from 8,317 in March 2006, according to DataQuick Information Systems, a La Jolla real estate information service. One-quarter of the sold homes previously had been repossessed in foreclosures. Banks usually sell such homes at a discount, which further depresses prices, particularly in their immediate neighborhoods.

The Bay Area median price for all homes tumbled 16.1 percent to $536,000 from last year's $639,000. The median is now 19.4 percent off its peak of $665,000 which was reached last June and July.

DataQuick said this was the slowest March since it began tracking statistics in 1988, and the seventh consecutive month of record lows.

As has consistently been the case, several counties - notably those close to job centers and in affluent areas - were in better shape. In San Francisco, the median price inched up to $755,000, up 0.3 percent from last year - the only county where the median grew. Sales in San Francisco were down 20.6 percent versus last year, a modest drop compared to the 47.2 percent decline in Alameda County, for example. San Mateo and Marin counties saw their medians slip about 4 percent, compared with the double-digit declines of the six other counties.

"Other parts of the state have been hit harder by the downturn in the housing market than the Bay Area," said Marshall Prentice, DataQuick president, in a statement. "Most of the distress is in areas that absorbed spillover activity during the 2004 and 2005 frenzy. for themost part that's the Central Valley and inland Southern California. It still appears that a lot of Bay Area activity is just on hold, waiting for the mortgage markets to open back up."

Although Congress raised the limits for so-called "jumbo" loans earlier this year, those changes are not yet reflected in the March results. Mortgages above the $417,000 jumbo limit accounted for only 29.8 percent of sales in March, compared with 62.2 percent a year ago. If jumbos had been more widely available, the median would have been closer to $597,000, DataQuick said.

Mortgage brokers and borrowers have reported that the higher limits - to as much as $729,750 in high-cost regions like the Bay Area - have not yet been reflected in lower interest rates.

Sales are down to a lesser extent compared to outlying areas, but they are still down by a significant margin. This has also been the pattern in Orange County and San Diego, but even the upperend of those markets are starting to show significant weakness.

OC Link

SD Link

 

[commisholio]

Having a good time with the "I told you so" there Tommy?

 

[jonessed]

My brother has been waiting to buy in Walnut Creek for a bit and he says prices aren't budging.

 

[OC Zed]

My brother has been waiting to buy in Walnut Creek for a bit and he says prices aren't budging.

But those homes aren't selling either. At some point, prices have to fall to meet demand.

 

[tommyGunZ]

Having a good time with the "I told you so" there Tommy?

I realize my bumps are childish and unbecoming, but I resisted the urge to bump my own predictions, and instead bumped some of the more amusing posts from others from the past couple of years.It's pretty funny to see how off many were, especially considering several are some of the smartest posters on the boards, IMO.

 

[jonessed]

My brother has been waiting to buy in Walnut Creek for a bit and he says prices aren't budging.

But those homes aren't selling either. At some point, prices have to fall to meet demand.

He says they are selling and he's been watching the market for awhile . He wants them to drop so he has no incentive to paint things rosy.

 

[stbugs]

Having a good time with the "I told you so" there Tommy?

I realize my bumps are childish and unbecoming, but I resisted the urge to bump my own predictions, and instead bumped some of the more amusing posts from others from the past couple of years.It's pretty funny to see how off many were, especially considering several are some of the smartest posters on the boards, IMO.

Off or in denial. Personally though, I find it hard to even read any of the median price pieces to figure out the price drops. Sales are down so much in some areas, that one $5 million house in SF could make the sales drops look more OK. In fact, I would say that the more affluent areas are where that will happen, so maybe the price drops are there, but you don't know it because of a few huge deals. A few houses in my neighborhood just went under contract as the summer season starts picking up, so stuff here in NC is slower, but definitely still moving.Personally, I always knew that my house in Northern VA wasn't worth 700k, but if someone wanted to buy it so I could move to a cheaper place, closer to family, that I like a whole lot more, well then have at it. Maybe I would have been better off hanging in an apartment for a couple years to try and get a little better deal, but I might not have gotten the house/lot I got that I love and my 3 kids and wife would have been a struggle. So, while I may have saved myself a fraction, I also know that had I waited to buy the house in 1998, I would have been way worse off because I might have continued to wait.

 

[BigSteelThrill]

Having a good time with the "I told you so" there Tommy?

I realize my bumps are childish and unbecoming, but I resisted the urge to bump my own predictions, and instead bumped some of the more amusing posts from others from the past couple of years.It's pretty funny to see how off many were, especially considering several are some of the smartest posters on the boards, IMO.

More power to you!I didnt buy when we wanted to 13-15+ months ago, my wife is astonished that I backed out (when we both wanted to buy) and it worked out so incredibly well. In a couple months, the savings on the for sale sign pricing* in our area, will be well over 100k.

*obviously this is just a basic way to look at it. there are lots of other devils in the details. but its still nice.

 

[tommyGunZ]

Having a good time with the "I told you so" there Tommy?

I realize my bumps are childish and unbecoming, but I resisted the urge to bump my own predictions, and instead bumped some of the more amusing posts from others from the past couple of years.It's pretty funny to see how off many were, especially considering several are some of the smartest posters on the boards, IMO.

Off or in denial. Personally though, I find it hard to even read any of the median price pieces to figure out the price drops. Sales are down so much in some areas, that one $5 million house in SF could make the sales drops look more OK. In fact, I would say that the more affluent areas are where that will happen, so maybe the price drops are there, but you don't know it because of a few huge deals.

Yep - the median price is really a poor indicator of the true health or gauge of the market. I think the Case Shiller Index and avg price per sq ft are much better indicators.

 

[Yankee23Fan]

Interesting consequence of all this - tax appeals. I have a ton of them and on top of that, there are no comps to use in the expert reports because nothing is moving, which throws a wrench into the whole process, on both sides.

 

[OC Zed]

My brother has been waiting to buy in Walnut Creek for a bit and he says prices aren't budging.

But those homes aren't selling either. At some point, prices have to fall to meet demand.

He says they are selling and he's been watching the market for awhile . He wants them to drop so he has no incentive to paint things rosy.

This is the best link I could find on Walnut Creek sales volume which says that February 2008 sales were down 10% from Feb. 2007 (which I'm betting was down at least 10% from 2006).I'd be curious to see what the March sales numbers say (and to also compare them with 2006 and the historical average), but I concede that a 10% decline is not a huge drop from 2007.

Still, this same site has an interesting post about the high number of Walnut Creek foreclosures. Link

 

[Gr00vus]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

 

[OC Zed]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

The best thing I can say is that you need to look at the fundamentals for your particular area. Obviously, some towns and cities are still in line for more declines while the bottom may be nearing for others (particularly the subprime towns once the foreclosures have cycled through). As a whole though, I'm not confident we are close to an overall bottom nationwide with the number of foreclosures still increasing and poised to continue for the next few years. Even many of the subprime loans that have reset and that are in default won't be foreclosed upon for another 6 to 8 months. The option, prime and Alt-A ARM foreclosures will be much further down the road (2009 - 2011).

 

[Gr00vus]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

The best thing I can say is that you need to look at the fundamentals for your particular area. Obviously, some towns and cities are still in line for more declines while the bottom may be nearing for others (particularly the subprime towns once the foreclosures have cycled through). As a whole though, I'm not confident we are close to an overall bottom nationwide with the number of foreclosures still increasing and poised to continue for the next few years. Even many of the subprime loans that have reset and that are in default won't be foreclosed upon for another 6 to 8 months. The option, prime and Alt-A ARM foreclosures will be much further down the road (2009 - 2011).

Good points. I'm a little anxious just because I signed a one year lease on a rental home while I continue to wait this out. I've waited this long, I don't want to miss the buying opportunities that are beginning to present themselves.

 

[OC Zed]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

The best thing I can say is that you need to look at the fundamentals for your particular area. Obviously, some towns and cities are still in line for more declines while the bottom may be nearing for others (particularly the subprime towns once the foreclosures have cycled through). As a whole though, I'm not confident we are close to an overall bottom nationwide with the number of foreclosures still increasing and poised to continue for the next few years. Even many of the subprime loans that have reset and that are in default won't be foreclosed upon for another 6 to 8 months. The option, prime and Alt-A ARM foreclosures will be much further down the road (2009 - 2011).

Good points. I'm a little anxious just because I signed a one year lease on a rental home while I continue to wait this out. I've waited this long, I don't want to miss the buying opportunities that are beginning to present themselves.

I can sympathize (seriously). I'm confident, however, that once we hit a bottom, the market won't be shooting back up anytime soon. Previous market bottoms have followed with long periods of stagnant prices.And even if prices do creep up 5% overnight, won't you feel better having the peace of mind knowing that you are buying in a rising market with your home value on (relatively) solid ground?Of course, if you find a home that you really like and can afford, and don't mind that the value might drop 10% or more in the near to mid-future (I'm not saying this in a bad way), go ahead and buy now. Your home should be a place to live first and foremost... not a financial pyramid.

 

[tommyGunZ]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

The best thing I can say is that you need to look at the fundamentals for your particular area. Obviously, some towns and cities are still in line for more declines while the bottom may be nearing for others (particularly the subprime towns once the foreclosures have cycled through). As a whole though, I'm not confident we are close to an overall bottom nationwide with the number of foreclosures still increasing and poised to continue for the next few years. Even many of the subprime loans that have reset and that are in default won't be foreclosed upon for another 6 to 8 months. The option, prime and Alt-A ARM foreclosures will be much further down the road (2009 - 2011).

Good points. I'm a little anxious just because I signed a one year lease on a rental home while I continue to wait this out. I've waited this long, I don't want to miss the buying opportunities that are beginning to present themselves.

OC Zed is 100% correct - especially with regard to the option, prime, and ALT-A Arm resets on the horizon. I read somewhere that the percentage of option ARM borrowers who are making the minimum payment (which means they're negatively amortizing) is something like a ridiculous 65%. In San Diego, the option ARMs and Alt A's were extremely popular in '05 and '06. When those reset, it will be even more inventory in the foreclosure pipeline.Hold out Groovus. Historically the outer sections crash first (Temecula, Chula Vista, etc) and the pain takes awhile to reach the premium areas. That's why Point Loma (my hood), PB, and La Jolla are still relatively strong. It's only a matter of time my friend....

 

[Phil Elliott]

annual appraisals expected to be mailed in the nest couple of weeks for Austin area....prices still up over last year.

 

[dparker713]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

The best thing I can say is that you need to look at the fundamentals for your particular area. Obviously, some towns and cities are still in line for more declines while the bottom may be nearing for others (particularly the subprime towns once the foreclosures have cycled through). As a whole though, I'm not confident we are close to an overall bottom nationwide with the number of foreclosures still increasing and poised to continue for the next few years. Even many of the subprime loans that have reset and that are in default won't be foreclosed upon for another 6 to 8 months. The option, prime and Alt-A ARM foreclosures will be much further down the road (2009 - 2011).

Good points. I'm a little anxious just because I signed a one year lease on a rental home while I continue to wait this out. I've waited this long, I don't want to miss the buying opportunities that are beginning to present themselves.

OC Zed is 100% correct - especially with regard to the option, prime, and ALT-A Arm resets on the horizon. I read somewhere that the percentage of option ARM borrowers who are making the minimum payment (which means they're negatively amortizing) is something like a ridiculous 65%. In San Diego, the option ARMs and Alt A's were extremely popular in '05 and '06. When those reset, it will be even more inventory in the foreclosure pipeline.Hold out Groovus. Historically the outer sections crash first (Temecula, Chula Vista, etc) and the pain takes awhile to reach the premium areas. That's why Point Loma (my hood), PB, and La Jolla are still relatively strong. It's only a matter of time my friend....

I fail to see why there would be a highly significant increase in defaults of prime borrowers over historic levels. Yes, there is some incentive to walk away from an over valued house, but there are practical concerns that would make that option less palatable. Prime borrowers are generally not first time home buyers and havent been in the rental market in a long time. They have plenty of stuff and no desire to get rid of the majority of it. Additionally, trying to buy another home without selling a current home will start to send red flags up and down the mortgage industry. While its not going to be that banks' loan you'll be seeking to default on, there is alot less security for the bank to loan money to someone that has already shown a willingness to walk away from a loan. Finally, the slashing of rates by the Fed the past few months will make refi's much more desireable and will also mean when some of these ARMs do kick in the pain wont be as bad as it could have been. ETA - Also, those cut rates will allow the banks that survive to see some monster profits starting in the 3rd quarter in certain sectors. Allowing them to once again think about loosening their lending standards some to get first time buyer into the market.Bottom line is, the housing market will once again be following the lead of the economy and not the other way around. Markets with strong job markets will have strong housing markets. This is going to very from place to place, but SD will likely be one of the first places to recover, as it was one of the first places to be hit. No more wagging the dog. And just remember, it could be worse. You could live in Detroit.

 

[OC Zed]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

The best thing I can say is that you need to look at the fundamentals for your particular area. Obviously, some towns and cities are still in line for more declines while the bottom may be nearing for others (particularly the subprime towns once the foreclosures have cycled through). As a whole though, I'm not confident we are close to an overall bottom nationwide with the number of foreclosures still increasing and poised to continue for the next few years. Even many of the subprime loans that have reset and that are in default won't be foreclosed upon for another 6 to 8 months. The option, prime and Alt-A ARM foreclosures will be much further down the road (2009 - 2011).

Good points. I'm a little anxious just because I signed a one year lease on a rental home while I continue to wait this out. I've waited this long, I don't want to miss the buying opportunities that are beginning to present themselves.

OC Zed is 100% correct - especially with regard to the option, prime, and ALT-A Arm resets on the horizon. I read somewhere that the percentage of option ARM borrowers who are making the minimum payment (which means they're negatively amortizing) is something like a ridiculous 65%. In San Diego, the option ARMs and Alt A's were extremely popular in '05 and '06. When those reset, it will be even more inventory in the foreclosure pipeline.Hold out Groovus. Historically the outer sections crash first (Temecula, Chula Vista, etc) and the pain takes awhile to reach the premium areas. That's why Point Loma (my hood), PB, and La Jolla are still relatively strong. It's only a matter of time my friend....

I fail to see why there would be a highly significant increase in defaults of prime borrowers over historic levels. Yes, there is some incentive to walk away from an over valued house, but there are practical concerns that would make that option less palatable. Prime borrowers are generally not first time home buyers and havent been in the rental market in a long time. They have plenty of stuff and no desire to get rid of the majority of it. Additionally, trying to buy another home without selling a current home will start to send red flags up and down the mortgage industry. While its not going to be that banks' loan you'll be seeking to default on, there is alot less security for the bank to loan money to someone that has already shown a willingness to walk away from a loan. Finally, the slashing of rates by the Fed the past few months will make refi's much more desireable and will also mean when some of these ARMs do kick in the pain wont be as bad as it could have been. ETA - Also, those cut rates will allow the banks that survive to see some monster profits starting in the 3rd quarter in certain sectors. Allowing them to once again think about loosening their lending standards some to get first time buyer into the market.Bottom line is, the housing market will once again be following the lead of the economy and not the other way around. Markets with strong job markets will have strong housing markets. This is going to very from place to place, but SD will likely be one of the first places to recover, as it was one of the first places to be hit. No more wagging the dog. And just remember, it could be worse. You could live in Detroit.

These are well reasoned arguments, but does not take into account the fact that people with the means to pay their underwater mortgages are already starting to walk away intentionally (regardless of the negative credit repercussions). With further price declines, the number of "mortgage walkers" will only increase.Also, the substantial rate cuts that we have seen in the last 6 months have had very little effect in bringing interest rates down. This is particularly true in the higher cost areas experiencing the most problems in the housing market. Falling home prices combined with higher rates make refinancing a very difficult proposition for prime and alt-A borrowers.And I don't agree with the philosophy that markets with strong job markets equates to markets with strong housing markets. The current housing collapse started long before the job market turned downward. Demand at these prices dried up when high paying jobs and cheap financing were plentiful. This underscores the fact that even with a high paying job, borrowers' incomes still could not afford homes at the present price levels under sustainable financing terms. Essentially, the market won't rebound until the price-to-income ratios fall back to historical levels. We still have a long way to go in that regard.

 

[Redwes25]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

I think this is non-issue. Look at what interest rates have dropped to. Prime Lenders won't have issues as once thought.

 

[Redwes25]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

The best thing I can say is that you need to look at the fundamentals for your particular area. Obviously, some towns and cities are still in line for more declines while the bottom may be nearing for others (particularly the subprime towns once the foreclosures have cycled through). As a whole though, I'm not confident we are close to an overall bottom nationwide with the number of foreclosures still increasing and poised to continue for the next few years. Even many of the subprime loans that have reset and that are in default won't be foreclosed upon for another 6 to 8 months. The option, prime and Alt-A ARM foreclosures will be much further down the road (2009 - 2011).

Good points. I'm a little anxious just because I signed a one year lease on a rental home while I continue to wait this out. I've waited this long, I don't want to miss the buying opportunities that are beginning to present themselves.

OC Zed is 100% correct - especially with regard to the option, prime, and ALT-A Arm resets on the horizon. I read somewhere that the percentage of option ARM borrowers who are making the minimum payment (which means they're negatively amortizing) is something like a ridiculous 65%. In San Diego, the option ARMs and Alt A's were extremely popular in '05 and '06. When those reset, it will be even more inventory in the foreclosure pipeline.Hold out Groovus. Historically the outer sections crash first (Temecula, Chula Vista, etc) and the pain takes awhile to reach the premium areas. That's why Point Loma (my hood), PB, and La Jolla are still relatively strong. It's only a matter of time my friend....

I fail to see why there would be a highly significant increase in defaults of prime borrowers over historic levels. Yes, there is some incentive to walk away from an over valued house, but there are practical concerns that would make that option less palatable. Prime borrowers are generally not first time home buyers and havent been in the rental market in a long time. They have plenty of stuff and no desire to get rid of the majority of it. Additionally, trying to buy another home without selling a current home will start to send red flags up and down the mortgage industry. While its not going to be that banks' loan you'll be seeking to default on, there is alot less security for the bank to loan money to someone that has already shown a willingness to walk away from a loan. Finally, the slashing of rates by the Fed the past few months will make refi's much more desireable and will also mean when some of these ARMs do kick in the pain wont be as bad as it could have been. ETA - Also, those cut rates will allow the banks that survive to see some monster profits starting in the 3rd quarter in certain sectors. Allowing them to once again think about loosening their lending standards some to get first time buyer into the market.Bottom line is, the housing market will once again be following the lead of the economy and not the other way around. Markets with strong job markets will have strong housing markets. This is going to very from place to place, but SD will likely be one of the first places to recover, as it was one of the first places to be hit. No more wagging the dog. And just remember, it could be worse. You could live in Detroit.

I agree with this and you beat me to the point.

 

[Redwes25]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

The best thing I can say is that you need to look at the fundamentals for your particular area. Obviously, some towns and cities are still in line for more declines while the bottom may be nearing for others (particularly the subprime towns once the foreclosures have cycled through). As a whole though, I'm not confident we are close to an overall bottom nationwide with the number of foreclosures still increasing and poised to continue for the next few years. Even many of the subprime loans that have reset and that are in default won't be foreclosed upon for another 6 to 8 months. The option, prime and Alt-A ARM foreclosures will be much further down the road (2009 - 2011).

Good points. I'm a little anxious just because I signed a one year lease on a rental home while I continue to wait this out. I've waited this long, I don't want to miss the buying opportunities that are beginning to present themselves.

OC Zed is 100% correct - especially with regard to the option, prime, and ALT-A Arm resets on the horizon. I read somewhere that the percentage of option ARM borrowers who are making the minimum payment (which means they're negatively amortizing) is something like a ridiculous 65%. In San Diego, the option ARMs and Alt A's were extremely popular in '05 and '06. When those reset, it will be even more inventory in the foreclosure pipeline.

Hold out Groovus. Historically the outer sections crash first (Temecula, Chula Vista, etc) and the pain takes awhile to reach the premium areas. That's why Point Loma (my hood), PB, and La Jolla are still relatively strong. It's only a matter of time my friend....

I fail to see why there would be a highly significant increase in defaults of prime borrowers over historic levels. Yes, there is some incentive to walk away from an over valued house, but there are practical concerns that would make that option less palatable. Prime borrowers are generally not first time home buyers and havent been in the rental market in a long time. They have plenty of stuff and no desire to get rid of the majority of it. Additionally, trying to buy another home without selling a current home will start to send red flags up and down the mortgage industry. While its not going to be that banks' loan you'll be seeking to default on, there is alot less security for the bank to loan money to someone that has already shown a willingness to walk away from a loan. Finally, the slashing of rates by the Fed the past few months will make refi's much more desireable and will also mean when some of these ARMs do kick in the pain wont be as bad as it could have been.

ETA - Also, those cut rates will allow the banks that survive to see some monster profits starting in the 3rd quarter in certain sectors. Allowing them to once again think about loosening their lending standards some to get first time buyer into the market.

Bottom line is, the housing market will once again be following the lead of the economy and not the other way around. Markets with strong job markets will have strong housing markets. This is going to very from place to place, but SD will likely be one of the first places to recover, as it was one of the first places to be hit. No more wagging the dog. And just remember, it could be worse. You could live in Detroit.

These are well reasoned arguments, but does not take into account the fact that people with the means to pay their underwater mortgages are already starting to walk away intentionally (regardless of the negative credit repercussions). With further price declines, the number of "mortgage walkers" will only increase.Also, the substantial rate cuts that we have seen in the last 6 months have had very little effect in bringing interest rates down. This is particularly true in the higher cost areas experiencing the most problems in the housing market. Falling home prices combined with higher rates make refinancing a very difficult proposition for prime and alt-A borrowers.

And I don't agree with the philosophy that markets with strong job markets equates to markets with strong housing markets. The current housing collapse started long before the job market turned downward. Demand at these prices dried up when high paying jobs and cheap financing were plentiful. This underscores the fact that even with a high paying job, borrowers' incomes still could not afford homes at the present price levels under sustainable financing terms. Essentially, the market won't rebound until the price-to-income ratios fall back to historical levels. We still have a long way to go in that regard.

For prime borrowers. I don't think so. I was just quoted a 30 year fixed at 5.75% no points that is really low and much lower than before. Adjustables are also down much lower from before rate cutes with fed funds rate so low.We are talking about Prime borrowers and not people with issues.

 

[Gr00vus]

Essentially, the market won't rebound until the price-to-income ratios fall back to historical levels. We still have a long way to go in that regard.

To me this is the real key to the whole thing. Low rates are great and all, but just because you can borrow money it doesn't mean you can actually afford homes out of your price range (or what should be your price range) - you have to be able to make the payments. Cheap money (or what seems like cheap money short term, followed by expensive money on reset, which is even worse) got people into this mess in the first place, it's not going to be the reason for a full recovery. That only happens when people are back in deals they can actually afford. And that's what I'm wondering about - how much of a shake out has there been, and how much is left. From what TGunz and Zed are saying it looks like there's still more shake out left.I don't understand the wagging the dog comment (I hate that cliche anyway) - the economy isn't so hot. Whatever the reason, that should keep prices down, or level at best.

 

[dparker713]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

The best thing I can say is that you need to look at the fundamentals for your particular area. Obviously, some towns and cities are still in line for more declines while the bottom may be nearing for others (particularly the subprime towns once the foreclosures have cycled through). As a whole though, I'm not confident we are close to an overall bottom nationwide with the number of foreclosures still increasing and poised to continue for the next few years. Even many of the subprime loans that have reset and that are in default won't be foreclosed upon for another 6 to 8 months. The option, prime and Alt-A ARM foreclosures will be much further down the road (2009 - 2011).

Good points. I'm a little anxious just because I signed a one year lease on a rental home while I continue to wait this out. I've waited this long, I don't want to miss the buying opportunities that are beginning to present themselves.

OC Zed is 100% correct - especially with regard to the option, prime, and ALT-A Arm resets on the horizon. I read somewhere that the percentage of option ARM borrowers who are making the minimum payment (which means they're negatively amortizing) is something like a ridiculous 65%. In San Diego, the option ARMs and Alt A's were extremely popular in '05 and '06. When those reset, it will be even more inventory in the foreclosure pipeline.Hold out Groovus. Historically the outer sections crash first (Temecula, Chula Vista, etc) and the pain takes awhile to reach the premium areas. That's why Point Loma (my hood), PB, and La Jolla are still relatively strong. It's only a matter of time my friend....

I fail to see why there would be a highly significant increase in defaults of prime borrowers over historic levels. Yes, there is some incentive to walk away from an over valued house, but there are practical concerns that would make that option less palatable. Prime borrowers are generally not first time home buyers and havent been in the rental market in a long time. They have plenty of stuff and no desire to get rid of the majority of it. Additionally, trying to buy another home without selling a current home will start to send red flags up and down the mortgage industry. While its not going to be that banks' loan you'll be seeking to default on, there is alot less security for the bank to loan money to someone that has already shown a willingness to walk away from a loan. Finally, the slashing of rates by the Fed the past few months will make refi's much more desireable and will also mean when some of these ARMs do kick in the pain wont be as bad as it could have been. ETA - Also, those cut rates will allow the banks that survive to see some monster profits starting in the 3rd quarter in certain sectors. Allowing them to once again think about loosening their lending standards some to get first time buyer into the market.Bottom line is, the housing market will once again be following the lead of the economy and not the other way around. Markets with strong job markets will have strong housing markets. This is going to very from place to place, but SD will likely be one of the first places to recover, as it was one of the first places to be hit. No more wagging the dog. And just remember, it could be worse. You could live in Detroit.

These are well reasoned arguments, but does not take into account the fact that people with the means to pay their underwater mortgages are already starting to walk away intentionally (regardless of the negative credit repercussions). With further price declines, the number of "mortgage walkers" will only increase.Also, the substantial rate cuts that we have seen in the last 6 months have had very little effect in bringing interest rates down. This is particularly true in the higher cost areas experiencing the most problems in the housing market. Falling home prices combined with higher rates make refinancing a very difficult proposition for prime and alt-A borrowers.And I don't agree with the philosophy that markets with strong job markets equates to markets with strong housing markets. The current housing collapse started long before the job market turned downward. Demand at these prices dried up when high paying jobs and cheap financing were plentiful. This underscores the fact that even with a high paying job, borrowers' incomes still could not afford homes at the present price levels under sustainable financing terms. Essentially, the market won't rebound until the price-to-income ratios fall back to historical levels. We still have a long way to go in that regard.

My contention isnt that no prime borrowers will walk away, but that the ones that do will not be nearly as plentiful as the subprime defaulters. We should continue to see a fairly prolonged increase of foreclosures over the next several years relative to historic levels, I just dont think the bump from prime ARM resets will be anywhere near the level of the subprime resets and something that banks will have an easier time mitigating. As I had said, the cut in rates wont manifest itself into bank profits until the back end of the year. At that point you can expect banks to once again be more willing to work out new refi's and start taking on first time buyers, even though for the best of borrowers the deals are already there. The prime ARMs for the most part arent being reset anytime soon. There is still time for conditions to change significantly enough to avert another round of massive foreclosures. The housing collapse started before a downturn in the job market because the house market essentially decoupled from the job market fundamentals. For a period no matter what was happening, prices went up. People were essentially treating their homes as an additional source of income, instead of an investment that has a solid long term outlook. But instead of seeing this bubble completely burst, I think its more likely that as we approach the historic price-to-income ratios we'll see a bottom somewhere moderately above that mark. Partially due to people eyeing perceived good deals all around them and partially due to the steady upward climb of rental rates. Thereafter, I expect a somewhat stagnant market with increasing volume, but not pricing. That is, until there is a rebound in the job fundamentals. Once that occurs, potential first time home buyers will feel more secure making a significant purchase and banks should be more willing to make the loans. Once you get an influx of first time buyers, then the cycle of upgrading gets going and discretionary home purchases will rise. Now, this all may take 2 years to completely settle out, but I suspect that in some areas it might happen quite a bit sooner.

 

[dparker713]

Essentially, the market won't rebound until the price-to-income ratios fall back to historical levels. We still have a long way to go in that regard.

To me this is the real key to the whole thing. Low rates are great and all, but just because you can borrow money it doesn't mean you can actually afford homes out of your price range (or what should be your price range) - you have to be able to make the payments. Cheap money (or what seems like cheap money short term, followed by expensive money on reset, which is even worse) got people into this mess in the first place, it's not going to be the reason for a full recovery. That only happens when people are back in deals they can actually afford. And that's what I'm wondering about - how much of a shake out has there been, and how much is left. From what TGunz and Zed are saying it looks like there's still more shake out left.I don't understand the wagging the dog comment (I hate that cliche anyway) - the economy isn't so hot. Whatever the reason, that should keep prices down, or level at best.

For a while there, perceived home values and profits made from home speculation were a driving force staving off an economic downturn. People felt fine about a whole host of issues because they thought their homes were increasing in value at an astounding rate and that would continue forever. Now people are having to adjust their spending to be more inline with their income, and once again a person's income will be of paramount importance - not the teaser rate.

 

[tommyGunZ]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

The best thing I can say is that you need to look at the fundamentals for your particular area. Obviously, some towns and cities are still in line for more declines while the bottom may be nearing for others (particularly the subprime towns once the foreclosures have cycled through). As a whole though, I'm not confident we are close to an overall bottom nationwide with the number of foreclosures still increasing and poised to continue for the next few years. Even many of the subprime loans that have reset and that are in default won't be foreclosed upon for another 6 to 8 months. The option, prime and Alt-A ARM foreclosures will be much further down the road (2009 - 2011).

Good points. I'm a little anxious just because I signed a one year lease on a rental home while I continue to wait this out. I've waited this long, I don't want to miss the buying opportunities that are beginning to present themselves.

OC Zed is 100% correct - especially with regard to the option, prime, and ALT-A Arm resets on the horizon. I read somewhere that the percentage of option ARM borrowers who are making the minimum payment (which means they're negatively amortizing) is something like a ridiculous 65%. In San Diego, the option ARMs and Alt A's were extremely popular in '05 and '06. When those reset, it will be even more inventory in the foreclosure pipeline.

Hold out Groovus. Historically the outer sections crash first (Temecula, Chula Vista, etc) and the pain takes awhile to reach the premium areas. That's why Point Loma (my hood), PB, and La Jolla are still relatively strong. It's only a matter of time my friend....

I fail to see why there would be a highly significant increase in defaults of prime borrowers over historic levels. Yes, there is some incentive to walk away from an over valued house, but there are practical concerns that would make that option less palatable. Prime borrowers are generally not first time home buyers and havent been in the rental market in a long time. They have plenty of stuff and no desire to get rid of the majority of it. Additionally, trying to buy another home without selling a current home will start to send red flags up and down the mortgage industry. While its not going to be that banks' loan you'll be seeking to default on, there is alot less security for the bank to loan money to someone that has already shown a willingness to walk away from a loan. Finally, the slashing of rates by the Fed the past few months will make refi's much more desireable and will also mean when some of these ARMs do kick in the pain wont be as bad as it could have been.

ETA - Also, those cut rates will allow the banks that survive to see some monster profits starting in the 3rd quarter in certain sectors. Allowing them to once again think about loosening their lending standards some to get first time buyer into the market.

Bottom line is, the housing market will once again be following the lead of the economy and not the other way around. Markets with strong job markets will have strong housing markets. This is going to very from place to place, but SD will likely be one of the first places to recover, as it was one of the first places to be hit. No more wagging the dog. And just remember, it could be worse. You could live in Detroit.

These are well reasoned arguments, but does not take into account the fact that people with the means to pay their underwater mortgages are already starting to walk away intentionally (regardless of the negative credit repercussions). With further price declines, the number of "mortgage walkers" will only increase.Also, the substantial rate cuts that we have seen in the last 6 months have had very little effect in bringing interest rates down. This is particularly true in the higher cost areas experiencing the most problems in the housing market. Falling home prices combined with higher rates make refinancing a very difficult proposition for prime and alt-A borrowers.

And I don't agree with the philosophy that markets with strong job markets equates to markets with strong housing markets. The current housing collapse started long before the job market turned downward. Demand at these prices dried up when high paying jobs and cheap financing were plentiful. This underscores the fact that even with a high paying job, borrowers' incomes still could not afford homes at the present price levels under sustainable financing terms. Essentially, the market won't rebound until the price-to-income ratios fall back to historical levels. We still have a long way to go in that regard.

For prime borrowers. I don't think so. I was just quoted a 30 year fixed at 5.75% no points that is really low and much lower than before. Adjustables are also down much lower from before rate cutes with fed funds rate so low.We are talking about Prime borrowers and not people with issues.

I think you're overestimating prime borrowers. Just b/c someone had a high credit score doesn't mean that they made wise decisions w/re to how much house they can afford. In SoCal, a significant percentage of homes in default are owned by realtors and mortgage brokers who bought 3, 5, and even 7 homes when housing was skyrocketing. Lots of prime borrowers with household incomes of 80k-100k were buying 500-800k homes the past 5 years. It doesn't matter what your credit score is when you're biting off more than you can chew.

 

[drpill]

Here Comes the Alt-A Crisis

 

[tommyGunZ]

As a prospective buyer I'm getting a little antsy myself. Seems like all the same riff raff who were telling us there would be no bubble, and to keep buying on overextended credit are now saying that this thing won't bottom out for another year or two. It's starting to feel like everything's already in the market (including the recession gloom and doom), and this might be the bottom. I guess there are still some fundamental underpinnings that might give way if the prime debtors drop there homes when their rates reset, but to me it doesn't seem like there are as many of those, or that the impact will be as big as what's gone on the last year or so with the sub primes. Home prices in certain areas still seem out of whack in relation to incomes, but nothing like what it was before.

The best thing I can say is that you need to look at the fundamentals for your particular area. Obviously, some towns and cities are still in line for more declines while the bottom may be nearing for others (particularly the subprime towns once the foreclosures have cycled through). As a whole though, I'm not confident we are close to an overall bottom nationwide with the number of foreclosures still increasing and poised to continue for the next few years. Even many of the subprime loans that have reset and that are in default won't be foreclosed upon for another 6 to 8 months. The option, prime and Alt-A ARM foreclosures will be much further down the road (2009 - 2011).

Good points. I'm a little anxious just because I signed a one year lease on a rental home while I continue to wait this out. I've waited this long, I don't want to miss the buying opportunities that are beginning to present themselves.

OC Zed is 100% correct - especially with regard to the option, prime, and ALT-A Arm resets on the horizon. I read somewhere that the percentage of option ARM borrowers who are making the minimum payment (which means they're negatively amortizing) is something like a ridiculous 65%. In San Diego, the option ARMs and Alt A's were extremely popular in '05 and '06. When those reset, it will be even more inventory in the foreclosure pipeline.Hold out Groovus. Historically the outer sections crash first (Temecula, Chula Vista, etc) and the pain takes awhile to reach the premium areas. That's why Point Loma (my hood), PB, and La Jolla are still relatively strong. It's only a matter of time my friend....

I fail to see why there would be a highly significant increase in defaults of prime borrowers over historic levels. Yes, there is some incentive to walk away from an over valued house, but there are practical concerns that would make that option less palatable. Prime borrowers are generally not first time home buyers and havent been in the rental market in a long time. They have plenty of stuff and no desire to get rid of the majority of it. Additionally, trying to buy another home without selling a current home will start to send red flags up and down the mortgage industry. While its not going to be that banks' loan you'll be seeking to default on, there is alot less security for the bank to loan money to someone that has already shown a willingness to walk away from a loan. Finally, the slashing of rates by the Fed the past few months will make refi's much more desireable and will also mean when some of these ARMs do kick in the pain wont be as bad as it could have been. ETA - Also, those cut rates will allow the banks that survive to see some monster profits starting in the 3rd quarter in certain sectors. Allowing them to once again think about loosening their lending standards some to get first time buyer into the market.Bottom line is, the housing market will once again be following the lead of the economy and not the other way around. Markets with strong job markets will have strong housing markets. This is going to very from place to place, but SD will likely be one of the first places to recover, as it was one of the first places to be hit. No more wagging the dog. And just remember, it could be worse. You could live in Detroit.

These are well reasoned arguments, but does not take into account the fact that people with the means to pay their underwater mortgages are already starting to walk away intentionally (regardless of the negative credit repercussions). With further price declines, the number of "mortgage walkers" will only increase.Also, the substantial rate cuts that we have seen in the last 6 months have had very little effect in bringing interest rates down. This is particularly true in the higher cost areas experiencing the most problems in the housing market. Falling home prices combined with higher rates make refinancing a very difficult proposition for prime and alt-A borrowers.And I don't agree with the philosophy that markets with strong job markets equates to markets with strong housing markets. The current housing collapse started long before the job market turned downward. Demand at these prices dried up when high paying jobs and cheap financing were plentiful. This underscores the fact that even with a high paying job, borrowers' incomes still could not afford homes at the present price levels under sustainable financing terms. Essentially, the market won't rebound until the price-to-income ratios fall back to historical levels. We still have a long way to go in that regard.

My contention isnt that no prime borrowers will walk away, but that the ones that do will not be nearly as plentiful as the subprime defaulters. We should continue to see a fairly prolonged increase of foreclosures over the next several years relative to historic levels, I just dont think the bump from prime ARM resets will be anywhere near the level of the subprime resets and something that banks will have an easier time mitigating. As I had said, the cut in rates wont manifest itself into bank profits until the back end of the year. At that point you can expect banks to once again be more willing to work out new refi's and start taking on first time buyers, even though for the best of borrowers the deals are already there. The prime ARMs for the most part arent being reset anytime soon. There is still time for conditions to change significantly enough to avert another round of massive foreclosures. The housing collapse started before a downturn in the job market because the house market essentially decoupled from the job market fundamentals. For a period no matter what was happening, prices went up. People were essentially treating their homes as an additional source of income, instead of an investment that has a solid long term outlook. But instead of seeing this bubble completely burst, I think its more likely that as we approach the historic price-to-income ratios we'll see a bottom somewhere moderately above that mark. Partially due to people eyeing perceived good deals all around them and partially due to the steady upward climb of rental rates. Thereafter, I expect a somewhat stagnant market with increasing volume, but not pricing. That is, until there is a rebound in the job fundamentals. Once that occurs, potential first time home buyers will feel more secure making a significant purchase and banks should be more willing to make the loans. Once you get an influx of first time buyers, then the cycle of upgrading gets going and discretionary home purchases will rise. Now, this all may take 2 years to completely settle out, but I suspect that in some areas it might happen quite a bit sooner.

This very well may happen, but historically when bubbles burst, the correcting assets fall back to values below their pre-bubble levels. Just as irrational exuberance pushes asset prices far beyond what objective fundamentals suggest that asset is worth, irrational "doom and gloom" pushes assets through the fundamental floor on the way down.

 

[Gr00vus]

In SoCal, a significant percentage of homes in default are owned by realtors and mortgage brokers who bought 3, 5, and even 7 homes when housing was skyrocketing.

This kind of speculation is exactly the same thing that happened in SoCal back in the early 90's, which caused the real estate collapse that happened then. It took about 5 years to recover.

 

[drpill]

http://flippersintrouble.blogspot.com/

 

[tommyGunZ]

In SoCal, a significant percentage of homes in default are owned by realtors and mortgage brokers who bought 3, 5, and even 7 homes when housing was skyrocketing.

This kind of speculation is exactly the same thing that happened in SoCal back in the early 90's, which caused the real estate collapse that happened then. It took about 5 years to recover.

These realtors and mortgage brokers who saw their clients homes exploding in value naturally wanted a piece of the action. Who wouldn't? So they bought spec homes with Alt-A loans and their 700+ credit scores, and now they're defaulting and foreclosing.

 

[RoarinSonoran]

Anyone know how things are doing in the Twin Cities area?

 

[drpill]

Anyone know how things are doing in the Twin Cities area?

Some info here:http://www.aaronsold.com/blog/category/market-stats/

The October 2007 Median Sales Price for Twin Cities homes fell 3.5% from a year ago and 4.3% from two years ago, to $220,000.

 

[Gr00vus]

In SoCal, a significant percentage of homes in default are owned by realtors and mortgage brokers who bought 3, 5, and even 7 homes when housing was skyrocketing.

This kind of speculation is exactly the same thing that happened in SoCal back in the early 90's, which caused the real estate collapse that happened then. It took about 5 years to recover.

These realtors and mortgage brokers who saw their clients homes exploding in value naturally wanted a piece of the action. Who wouldn't? So they bought spec homes with Alt-A loans and their 700+ credit scores, and now they're defaulting and foreclosing.

Yep, I knew people back in the early 90's who'd buy a property, wait for any kind of price increase, take out another loan (plenty of creative financing back then too, but back then there was commercial real estate heavily involved as well as residential which made some deals even more convoluted) on it and roll that into buying another property, and just repeat the process as long as they could, ending up "owning" a huge chain of these properties all built on the quicksand of infinitely rising prices. When the #### came down, well obliteration doesn't even begin to describe what happened. Lives were ruined permanently.It gave me a pretty clear perspective of what was going on with this current run up, and I wondered how people who had lived through this before in SoCal could fall into such an obvious "history repeating itself" pattern - but greed tends to strip people of the ability to reason. I don't blame the people in other parts of the country as much because they probably didn't have exposure to much of what happened here back in the early 90's, but when I tried to bring that to people's attention they'd dismiss it off hand. "Oh things are different now "- sure thing buddy.

 

[Sonny Lubick Blowup Doll]

Page 28 of this thread is all-time.

 

[Sonny Lubick Blowup Doll]

People who were wrong about this will now reach for reasons outside of real estate, a kind of "perfect storm" if you will, that could never have been seen. Similar to the stock market, this whole thing...

 

[tommyGunZ]

People who were wrong about this will now reach for reasons outside of real estate, a kind of "perfect storm" if you will, that could never have been seen. Similar to the stock market, this whole thing...

"no one could have foreseen the unraveling of credit..."

 

[snitwitch]

People who were wrong about this will now reach for reasons outside of real estate, a kind of "perfect storm" if you will, that could never have been seen. Similar to the stock market, this whole thing...

"no one could have foreseen the unraveling of credit..."

When is it going to be prime time to buy into the San Diego market T-gunz? I'm talking about primary residence, not a flip job.

 

[tommyGunZ]

People who were wrong about this will now reach for reasons outside of real estate, a kind of "perfect storm" if you will, that could never have been seen. Similar to the stock market, this whole thing...

"no one could have foreseen the unraveling of credit..."

When is it going to be prime time to buy into the San Diego market T-gunz? I'm talking about primary residence, not a flip job.

Wish I knew. All I know is that it isn't now. Inventory is extremely high, foreclosures are increasing, and sales are very low.People who buy now are catching knives.

 

[Chadstroma]

People who were wrong about this will now reach for reasons outside of real estate, a kind of "perfect storm" if you will, that could never have been seen. Similar to the stock market, this whole thing...

"no one could have foreseen the unraveling of credit..."

When is it going to be prime time to buy into the San Diego market T-gunz? I'm talking about primary residence, not a flip job.

Wish I knew. All I know is that it isn't now. Inventory is extremely high, foreclosures are increasing, and sales are very low.People who buy now are catching knives.

Along those lines... my fiances sister bought a house in the SD area about a year and half ago. Bought at $650K. When my fiance told me about this, I told her that that was not such a good idea to which my fiance replied that she knows and everyone told her this. Well, her sister called her the other day for advice (my fiance is also in the banking industry) because they went to get a HELOC and when the appraisal came back it was at $350K. The question was what to do. Well... you have two choices. Walk away and watch your credit go down the tube or continue paying and forget about the HELOC.

 

[tommyGunZ]

People who were wrong about this will now reach for reasons outside of real estate, a kind of "perfect storm" if you will, that could never have been seen. Similar to the stock market, this whole thing...

"no one could have foreseen the unraveling of credit..."

When is it going to be prime time to buy into the San Diego market T-gunz? I'm talking about primary residence, not a flip job.

Wish I knew. All I know is that it isn't now. Inventory is extremely high, foreclosures are increasing, and sales are very low.People who buy now are catching knives.

Along those lines... my fiances sister bought a house in the SD area about a year and half ago. Bought at $650K. When my fiance told me about this, I told her that that was not such a good idea to which my fiance replied that she knows and everyone told her this. Well, her sister called her the other day for advice (my fiance is also in the banking industry) because they went to get a HELOC and when the appraisal came back it was at $350K. The question was what to do. Well... you have two choices. Walk away and watch your credit go down the tube or continue paying and forget about the HELOC.

Ouch. Unfortunately, she's not alone. Lots of people who bought in SD the past couple of years are in for a rude awakening should they need to move due to their job, having kids, etc.

 

[Chadstroma]

People who were wrong about this will now reach for reasons outside of real estate, a kind of "perfect storm" if you will, that could never have been seen. Similar to the stock market, this whole thing...

Well, for me, I did not expect the amount of massive issues throughout the lending industry. I expected the fly by nights and the irrational lenders to go belly up but the big lenders (WaMu, Countrywide, Wachovia, etc) to weather it without having to go to drastic measures. I was flat out wrong and the result of that is that credit is not out in the market as much and underwriting standards have choked up to extremely conservative measures almost completely industry wide. That was one big mistake for me in what I was expecting. The other place where I underestimated was the amount of 'fear' that would hit the market. The fear is what keeps inventory high and people on the sidelines. When people fear the economy then they act very conservatively and they do not make big purchases. I expected a down turn. I just underestimated how deep and how long it would be. Win some and lose some.

 

[tommyGunZ]

People who were wrong about this will now reach for reasons outside of real estate, a kind of "perfect storm" if you will, that could never have been seen. Similar to the stock market, this whole thing...

Well, for me, I did not expect the amount of massive issues throughout the lending industry. I expected the fly by nights and the irrational lenders to go belly up but the big lenders (WaMu, Countrywide, Wachovia, etc) to weather it without having to go to drastic measures. I was flat out wrong and the result of that is that credit is not out in the market as much and underwriting standards have choked up to extremely conservative measures almost completely industry wide. That was one big mistake for me in what I was expecting. The other place where I underestimated was the amount of 'fear' that would hit the market. The fear is what keeps inventory high and people on the sidelines. When people fear the economy then they act very conservatively and they do not make big purchases. I expected a down turn. I just underestimated how deep and how long it would be.

Win some and lose some.

It's not just fear Chad. People are on the sidelines because they can't afford current housing prices, at least in San Diego. The median family income is ~ 65k; the median family home is still almost 400k.Those numbers don't work.

 

[stbugs]

People who were wrong about this will now reach for reasons outside of real estate, a kind of "perfect storm" if you will, that could never have been seen. Similar to the stock market, this whole thing...

Well, for me, I did not expect the amount of massive issues throughout the lending industry. I expected the fly by nights and the irrational lenders to go belly up but the big lenders (WaMu, Countrywide, Wachovia, etc) to weather it without having to go to drastic measures. I was flat out wrong and the result of that is that credit is not out in the market as much and underwriting standards have choked up to extremely conservative measures almost completely industry wide. That was one big mistake for me in what I was expecting. The other place where I underestimated was the amount of 'fear' that would hit the market. The fear is what keeps inventory high and people on the sidelines. When people fear the economy then they act very conservatively and they do not make big purchases. I expected a down turn. I just underestimated how deep and how long it would be.

Win some and lose some.

It's not just fear Chad. People are on the sidelines because they can't afford current housing prices, at least in San Diego. The median family income is ~ 65k; the median family home is still almost 400k.Those numbers don't work.

TG, please stop just throwing our median income and median prices together. Ignoring wealth, equity and savings is really a bad idea. I understand your point, but it still doesn't make it correct.If 100% of home buyers were renters with 0 savings for down payment, then that ratio would make perfect sense, but that isn't reality. In that link above with Mr. Mortgage, I believe his spreadsheet said that there were 12 million+ homes in CA. There were 500k+ sub prime loans in CA that I believe originated in 2004-2007 and 700k+ ALt-A loans in CA for the same period. That means that 1.2 million loans on 12 million houses, i.e. 10%, are driving the other 90% of prime loans and/or houses with no loans at all, i.e. if you look at all 12 million houses, there is probably a considerable amount of equity and as usual the idiots getting burned are the ones that jumped in, not because they needed a house or figured out what they could afford, but because they got greedy.

That isn't to say that it isn't having an affect, but CA is one of the worst places for those loans, hence all of the lenders going belly up seemingly all HQ'd there, so the 10% ratio is probably high nationally. I am just trying to point out that there is a considerable amount of fear driving the housing market in the same way that the considerable optimism was driving from 1998-2005.

This will all sort itself out and when my kids start buying houses, they will be amazed that I only paid 250k for my first house in the 1990s, just like I was amazed that my parents only paid 50k back in the 1970. And by that time, hopefully, I will be close to mortgage free like many of the baby boomers who have been in their houses for 25-30+ years are now.

 

[OC Zed]

People who were wrong about this will now reach for reasons outside of real estate, a kind of "perfect storm" if you will, that could never have been seen. Similar to the stock market, this whole thing...

"no one could have foreseen the unraveling of credit..."

When is it going to be prime time to buy into the San Diego market T-gunz? I'm talking about primary residence, not a flip job.

Wish I knew. All I know is that it isn't now. Inventory is extremely high, foreclosures are increasing, and sales are very low.People who buy now are catching knives.

I've been as bearish on SoCal real estate as anyone, but I think there is a chance that we will be nearing a price bottom for certain segments of the market by late 2008/early 2009. Specifically, this would be the lowest end of the market currently experiencing all of the subprime foreclosures. Locally, the foreclosed homes are currently selling 35 to 40% off of the peak pricing. Although there are more and more subprime foreclosures coming online every day which should continue until mid-2009, demand is starting to pick up on these homes at the reduced prices. The eventual sale prices of these homes are significant because they truly form the floor of the market. The other segments of the market, however, (the middle and upper tiers) are still slow to respond with lower prices -- the more expensive the market tier, the more resistant sellers are to lower the price (e.g., sellers in Newport Beach are routinely asking 15 to 20% above the market prices at the peak in 2005/2006). Of course, these homes are not selling at these current prices. Given that the market operates as a food chain (dependent upon "move-up" buyers being able to afford their "move-up" homes) and the lingering credit issues on the upper end of the market (conforming and non-conforming jumbos are still prohibitively expensive and the oncoming wave of Alt-A and prime resets in 2009 through 2011), the same level of price declines will come eventually.

 

[tommyGunZ]

People who were wrong about this will now reach for reasons outside of real estate, a kind of "perfect storm" if you will, that could never have been seen. Similar to the stock market, this whole thing...

Well, for me, I did not expect the amount of massive issues throughout the lending industry. I expected the fly by nights and the irrational lenders to go belly up but the big lenders (WaMu, Countrywide, Wachovia, etc) to weather it without having to go to drastic measures. I was flat out wrong and the result of that is that credit is not out in the market as much and underwriting standards have choked up to extremely conservative measures almost completely industry wide. That was one big mistake for me in what I was expecting. The other place where I underestimated was the amount of 'fear' that would hit the market. The fear is what keeps inventory high and people on the sidelines. When people fear the economy then they act very conservatively and they do not make big purchases. I expected a down turn. I just underestimated how deep and how long it would be.

Win some and lose some.

It's not just fear Chad. People are on the sidelines because they can't afford current housing prices, at least in San Diego. The median family income is ~ 65k; the median family home is still almost 400k.Those numbers don't work.

TG, please stop just throwing our median income and median prices together. Ignoring wealth, equity and savings is really a bad idea. I understand your point, but it still doesn't make it correct.If 100% of home buyers were renters with 0 savings for down payment, then that ratio would make perfect sense, but that isn't reality. In that link above with Mr. Mortgage, I believe his spreadsheet said that there were 12 million+ homes in CA. There were 500k+ sub prime loans in CA that I believe originated in 2004-2007 and 700k+ ALt-A loans in CA for the same period. That means that 1.2 million loans on 12 million houses, i.e. 10%, are driving the other 90% of prime loans and/or houses with no loans at all, i.e. if you look at all 12 million houses, there is probably a considerable amount of equity and as usual the idiots getting burned are the ones that jumped in, not because they needed a house or figured out what they could afford, but because they got greedy.

That isn't to say that it isn't having an affect, but CA is one of the worst places for those loans, hence all of the lenders going belly up seemingly all HQ'd there, so the 10% ratio is probably high nationally. I am just trying to point out that there is a considerable amount of fear driving the housing market in the same way that the considerable optimism was driving from 1998-2005.

This will all sort itself out and when my kids start buying houses, they will be amazed that I only paid 250k for my first house in the 1990s, just like I was amazed that my parents only paid 50k back in the 1970. And by that time, hopefully, I will be close to mortgage free like many of the baby boomers who have been in their houses for 25-30+ years are now.

I agree that fear is a part of this, but why should we throw historical fundamentals out the window? Why is income/price ratio now irrelevant?