In fact, I'm in the ridiculous position of not even being able to afford to buy my own house. I paid $262,000 for my present house in 1998 and it is assessed at $450,000 just six years later. This rate of appreciation just isn't sustainable.
It's already happening. There are more million dollar homes around here then there are multi-millionaires to buy them. Folks are building these huge homes with little down and low adjustable rates, but a half-point upswing on a very expensive home can make you homeless overnight.
house prices are nutz in alot of states.
Five years into a 30 year fixed at 7.125%, refinanced to 15 years at 4.5%, with additional monthly principal. Looking forward to being mortgage free in 10 years.
One thing I don't see discussed in these articles is demand. Demand continues to be high in SoCal. Driven by population and the old reasons, weather, location etc. Demand my reduce the increase and not result in too drastic of a drop in values.
One thing I don't see discussed in these articles is demand. Demand continues to be high in SoCal. Driven by population and the old reasons, weather, location etc. Demand my reduce the increase and not result in too drastic of a drop in values.
Yeah, I hate it too when my little 3 bedroom townhouse rental property that I bought for $90,000 ten years ago drops to $850,000. What a pisser...
The market will do what it always does. Dip a little, stay flat, then take off in 10 to 20 years. Over, and over, and over, it does this...
This does not apply to the housing boom that has happened since Bush came into Office in 2000. That housing boom was lower and middle income class families buying homes as a result of his tax breaks. This "study" or opinion of "economists" is just that, and is not the result of anyone being queried in the housing industry.
More lies from the liberal media; anything to try to tear down what President Bush has accomplished. If the people on here agree with them (liberals) so readily, then why the hell did you pretend to vote for him in the first place??
Median price of $489,000. That means a family has to make close to $125,000 a year (if I did my math correctly) to be able to realistically afford that house. How many families in California make that much?
BTW, what's property tax in California? Does prop 13 protect homeowners from ever rising property tax?
What goes up must come down.
I kinda feel sorry for those folks in extremely overinflated areas, places like Seattle, Chicago, New York and San Fran.
Maybe I should just say in the blue counties.
Also, what could really start a collapse are interest only loans being done for homebuyers that use this product because it's the only way they can afford to buy homes at inflated prices. They may be (barely) able to afford the payment now, but in a few years there could be a double whammy. First, (assuming a 5 year interest only loan), now a loan becomes payable in 25 years rather than 30, and second, the rate that was in the low 5's is now in the 7 and 8 range (the rate could go as high as 10% or 11% depending on the ARM terms). Assuming a $200,000 loan at a starting rate of 5%, someone with an interest only payment could see their mortgage payment go from $833 per month to $1413 at a 7.00% rate, or $1817 if rates go up to 10% during the next 5 years. You could have quite a few foreclosures along with a limited number of buyers because they can't afford the home prices, even with interest only financing. I blame the mortgage investors for lowering the qualifying standards. They have made it too easy to qualify for financing. People making $25-30k a year in salary really shouldn't be buying homes 5 - 6 times their incomes. Personally, I plan on renting for a while and whether the upcoming storm.
I remember getting some unplanned upon money in 1999. I remember I wanted to get in on the tech stocks so I ended up buying a couple of tech/internet sector funds when the NASDAQ was 12,000. I believe both of those funds are now worth about 30% of what I paid for them. I definitely got in at the wrong time. I think people that have been buying homes after the big run up in home appreciation might have the same experience. I hope they got a fixed rate and a good home, because it doesn't look like they'll be going anywhere for the next few years.
I watched a similar report on the Nightly Business Report on PBS
[Excerpt and link: http://www.nightlybusiness.org/
2/07/04:Real Estate Meets Irrational Exuberance
PAUL KANGAS: Part of the reason consumers have been in the mood to spend this year is a strong housing market. Home prices have continued to soar, despite rising mortgage rates. But now some experts say American`s passion for real estate is becoming irrationally exuberant. Erika Miller reports.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Imagine a situation where home prices plunge 10 to 20 percent over a few years, where houses languish on the market for months, even as sellers desperately slash their asking prices. Some economists say that`s not out of the realm of possibility. They warn the U.S. residential housing market is a bubble ready to burst.
IAN MORRIS, CHIEF US ECONOMIST, HSBC SECURITIES: There are warning signs flashing. Firstly, prices have nearly doubled in many states right across the U.S. over the past five years. Also, valuations are extremely rich, particularly if you look at prices relative to income or prices relative to rent.
MILLER: Morris is also troubled by what he sees as a bubble psychology among homebuyers. He says many assume that because real estate prices have skyrocketed the past few years, they will continue to do so. Another concern is rising interest rates, because they make borrowing more expensive. The Federal Reserve began nudging up rates over the summer and is expected to keep raising rates next year.
MORRIS: It typically takes more than just one or two rate hikes as well. You need usually a good series of them, say, over a year, before people see the monetary tightening having an influence on their asset price expectations for the future. So, difficult to say, but we suspect that by the middle of next year, the party will be over.
MILLER: But not everyone buys those arguments. The housing bulls point out that although interest rates are rising, they are still at historically low levels.
DOUG NAIDUS, CEO, MORTGAGEIT: Notional interest rates are still relatively low. If they rise by a percent or 2 percent over the next couple of years, they`ll still be relatively low. And if they continue to rise in a manageable way, the way they have in the past year -- most particularly the last six months -- that is something that will be absorbed into the market.
MILLER: Plus, optimists say the popularity of adjustable rate mortgages has made borrowing more affordable for many Americans. And some say the longer there`s talk of a bubble, the less likely it is to actually happen.
NAIDUS: The mere fact that we`ve been talking about a bubble now for a year and a half has added duration to what people would call a soft landing.
MILLER: A downturn in housing-- if it comes-- could have serious implications for the overall economy. Some economists predict that if home prices fall 5 to 10 percent nationwide, the economy`s growth rate could be cut in half. Erika Miller, NIGHTLY BUSINESS REPORT, New York.]
I think the report was slanted as you watched the video toward the bubble bears from the liberal think tanks (true real world experts/sarcasm)
I'd like to note that your article focuses on local markets affected adversely by federal, state, and local zoning issues with high environmental controls and prohibitions on building that inflates the prices of real estate to unrealistic levels (eg. San Diego and all). Note that NJ real estate prices have sailed through the roof with Gov McGreedy's control on housing growth/taxation measures. Real world house costing $250,000 in 1994 costs over $400,000 because of NJ's environmental, judicial, and governmental intrusion into the free market.
I don't quite find the connection between this biased pseudo-economic report mirroring the 1920's?
Yes,the market BUBBLE of the mid '20s (America was actually in a recession in the early '20s and the stock market hadn't zoomed yet!)-'29 and the TECH BUBBLE of the mid '90s,which broke in March of 2000,have similarities a plenty;however,that has less than nothing to do with the supposed real estate Bubble that "experts" have been calling for for years and years now.
The last two real estate BUBBLES,were in 1873 and 1890. Real estate,like most things,go in cycles and has ups and downs;however,BUBBLES are something quite different.
WE'RE DOOOOOOOOOOOOOOOOOOOOOOOOMED!!!!
My son is actively planning for some alternative source of income as the home sale market cools off.
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Please explain.
The slow down is already taking place. But what I see the depression will not be widespread as it was in the 30's. Right now everyday somebody is losing his good paying job. So what is not a depression to me it is to somebody with a wife and kids. This easy credit has gotten out of hand. People surviving on credit cards to live. Houses that needed a 20% down payment can be bought with 0% down and first payment not due til 2006. Give me a break.