Posted on 09/14/2007 5:37:16 AM PDT by Hydroshock
NEW YORK (Money Magazine) -- Whether you're a home seller, owner or buyer, by this point you've got to be feeling a little rattled. The bad news about the housing market seems never ending: Foreclosures have more than doubled over the past year.
Sales of existing homes are off 11 percent from this time last year. At that rate, it will take at least nine months to work off the inventory of unsold homes. And median home prices in July (the most recent figure available) dropped for the 12th month in a row.
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Worse yet, all that happened before problems in subprime lending expanded throughout the mortgage market and beyond, creating what's popularly being referred to as the credit crunch.
While it's too soon to see the impact reflected in the numbers, the immediate future is clear: As lenders tighten their borrowing standards, fewer people will qualify for mortgages.
Fewer qualified buyers can only mean that housing prices will slump further. Worst of all, economists don't see much chance for a turnaround until mid- 2008 and possibly into 2009.
(Excerpt) Read more at money.cnn.com ...
Let's hope not. For me the last *real* recession was back in the early 70's. My family was a West TN cotton farming family that wasn't particularly affected. However, I still remember the highly educated managers and engineers coming up to our house 2-3 evenings per week with hat in hand - looking for jobs as farm laborers.
A *real* recession is pretty ugly alright!
But my point is that, increasingly, you are getting all of that in the suburbs, too - especially in California. You've got to go way out to the backwoods now to avoid it.
I lived in the suburbs most of my life, and now split time between two cities, living right downtown in both. I can't say that the quality of urban life is appreciably worse than suburban life in either city, though twenty years ago the differences were doubtless much greater. If suburbs were what they used to be, I would probably prefer to live in one - but they've become the worst of both worlds in a lot of ways.
A very unpleasant truth is that stereotypical urban/suburban quality of life differences are primarily differences in proximity to majority black neighborhoods. In a lot of West Coast cities, lower-income blacks have been priced out (or driven out by illegal immigrants) and have relocated to suburban areas - resulting in a patchwork quilt of safe/unsafe areas that offers little advantage over urban living. Wealthy whites are returning to cities in droves, and the cycle is starting over again.
I don't know. Maybe that? :-)
The only thing you left out was reversion back to the stone age.
If Fred has $400,000 and he puts $100,000 of it down on a house, he has a $300,000 mortgage that must be paid off over time. But he also has $300,000 in his pocket that can be invested elsewhere. So if he's paying off a 6% mortgage and getting a 6% return on his investment, he's at least breaking even in a nominal sense -- and he's coming out ahead if his 6% mortgage interest is tax-deductible and the 6% return on his investment is taxed at a lower dividend/capital gains rate.
Joe owns the house outright, and everything he earns after that is available for other use & investment. Heck, he can drop his expenses to near zero (compared to a mortgage) and virtually retire with little more than a part-time job.
Fred may be able to play numbers games and make a marginal profit (I didn’t say one couldn’t make money in this, I’ve just concluded the risks outweigh the benefits), but if things go sour he still owes the lender that money. A lot can happen in 30 years.
Most are like Sally, who buys the $400,000 house with $100,000 down (or $0 down), and has to spend the next 30 years earning $600,000 to pay off the loan.
It's about time. I used up all my Yen in the early 90's
What kind of business are you in?
LOL! Rough night for me.
IMO, prices will come down another 15% minimum...so with that, it's kind of hard for me to look a prospective buyer in the eye who asks me "Is now a good time to buy?"
Last real estate bust was in 1990 and it took the entire decade of the nineties for it to return to 1990 prices.
Of course they doubled within the next 4 years..but that can't happen again without more creative mortgage programs to make the monthly nut manageable.
Then don't live there.
Suburban Georgia is surprisingly affordable. Other areas will do nicely too.
Actually, if you search the web a bit, you can find towns that will GIVE you land so long as you build a modest house and live there a few years. That plus a "Glassic Soho" for $65K will give anyone a nice starting point. May not be as exciting as southern Connecticut, but "supply and demand" rules.
Be honest & humble about what you need & want, look carefully, and you can live pretty well on not very much - and everything you earn thereafter isn't already claimed by someone else.
Come to Houston, you can get 2500 sq ft home on 8000+ sq ft lot 30 to 45 minutes from downtown at less tehn $200K.
So where do you live in the meantime? You’re either paying rent (not tax-deductible), or you’ve paid cash for your home and thus can’t invest it elsewhere.
The government has been propping up our economy for years by allowing low interest rates for the housing market that have somewhat offset high inflation in the energy sector.
Now that energy has started draining people of disposable income, every other sector, housing and retail are suffering. With less income available to spread around, everyone has downward pressure on their income.
For example, in my business (masonry contractor) competing contractors are dropping their prices by 20% just to have the work, which has dried up. Taxes and insurance adds 35% to the cost of payroll. With all the overhead , taxes, etc, one just as well be working for someone else. There is no need of trying to operate a business on an hourly wage because it can’t be done and cover overhead. I would rather sit on my ass and go broke as to work it off and still go broke. Thats why I post here today because I am sitting on my ass pondering a future at McDonalds just to make my truck payment. Thank God my wife has a good, recession proof job but losing a second average income hurts tremendously.
The general contractor loves the competition for their limited work because it reduces his costs. But I guarantee non of the sub contractors will have enough income to buy that home or any other home. They will be lucky to keep insurance and cover payroll taxes before winter hits. And the house will sit unsold so interest eats up the contractors profit.
Less disposable income, less demand for goods and services.
Lower profits= recession.
There's one thing about Washington DC: every two years a new influx of political hangers-on arrives and needs housing, so the real estate changes hands. Yes, there's a massive amount of backed-up inventory, but some houses still do sell if their owners aren't greedy and don't ask an unrealistic price, as if it's still 2005.
masonry contractor residential/commercial
I am leaning heavily now towards masonry restoration, tuckpointing etc but didn’t shift gears away from new construction quite soon enough to keep a steady work flow. Although there is some good promise for future work things are really tight for the time being.
Come to think of it, other than in certain urban areas following the riots of the 1960s, I can't think of a time when there were real estate "firesales" in the region. Of course, you had cases in the Bronx in the 60s and 70s where the owners simply paid locals to torch the buildings, but that's a whole 'nother story.
During the last big real estate downturn (early 1990s), I remember something similar to what we see now (housing prices plateuing and sitting on the market for a long time), rather than an out and out crash (which seems to hit the sunbelt/resort areas harder than the NE).
Living below your means and saving for a rainy day are always a good idea. I’d usually recommend avoiding debt, too — except that in some cases it makes all the sense in the world to have it.
You live where you can afford. Don’t live somewhere expensive.
Sure, maybe you’ll need to rent for a bit. Humble acommodations are not expensive if you choose wisely.
Sure, maybe the first time out you’ll need a mortgage. Get something for $50,000 (not a half-million), live frugally, start early and pay it off ASAP.
Heck, live with mom & dad for a while. Get a fixer-upper. Go to the last-chance gov’t repo auctions. Get a used RV and an unwanted plot. Nice meals can be had for $1; save the rest. With some creativity, elbow grease, and crow pie you can get to an outright title pretty quick.
If we’re talking mid-six-digits (which this thread is focusing on), you’re probably driven more by greed & pride (fancy house and/or prestigious location) than economic wisdom. (Full disclosure: to oversimplify, I’m a narcissistic hypocrite - but know the risk.)
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