Posted on 07/12/2005 6:09:10 AM PDT by thinking4me
When we first began writing about the possibility of a housing bubble nearly three years ago, economists who sketched a grim scenario of downward spiraling prices largely were dismissed as overly pessimistic cranks. So far, their harsh projections have failed to materialize. But even the most optimistic housing industry boosters are beginning to worry, to wonder and to wish out loud for a cooling-off period....... Federal Reserve Chairman Alan Greenspan, who as recently as last year dismissed talk of a speculative housing bubble, now acknowledges that there are “a lot of local bubbles” in the housing market, although he sees nothing along the lines of a NASDAQ-type asset bubble that could deflate suddenly with national economic consequences....... Regulators are working on additional guidelines for non-traditional loans issued by primary mortgage lenders, a spokesman for the Federal Deposit Insurance Corp. said..... Richard Brown, chief economist for the FDIC, said he worries that the easy availability of such mortgages is contributing to the rapid rise in housing prices.
(Excerpt) Read more at msnbc.msn.com ...
While I'm all for encouraging homeownership and making it easier, there's a catch-22. The lower an interest rate and payment, the faster housing prices will rise. That doesn't even include the inherent risks of these type of loans.
While I'm all for encouraging homeownership and making it easier, there's a catch-22. The lower an interest rate and payment, the faster housing prices will rise. That doesn't even include the inherent risks of these type of loans.>>>>>
There are far too many people who approach a major purpose based only on what maximum payment they can stand to make. When rates go down they don't buy the 2000 square foot home and enjoy the lower payment, they buy 2500 square feet and stay stretched to the maximum. The same people buy more expensive cars when interest rates are low because "the payment is affordable now".
That is exactly the problem. Personally, I don't see how people do it (buy a $600,000 house on $80 grand/yr.) but people do it all the time-and in California if you want to own a home it's your only choice...
This is a perfect example of whats wrong in this country. FAR too many people spend more than they should be on their homes, their cars, and luxuries and end up stretching themselves too thin just for the sake of keeping up and competing and in the end either end up going bankrupt or saving very little. I think the bigger problem is not that more people go bankrupt, its that most of these peole will spend the majority of their incomes toward a big house and nice cars that they lease and over time end up saving so little that when it comes time to retire they are screwed and hitting up uncle sam for social security or whatnot.
i mean i see it here in california all the time(i'm a student), this place is a beautiful place to live but housing prices are out of control yet people still continue to move here and spend their entire income toward a home. the average price for a home in san diego is 680k. 400-500k will get you a 2 bedroom condo in a decent place 500-600 will probably get you a 3 bedroom house adn 600+ is where you start to hit the 2000+ square feet 4 bedroom houses most people out here want at least. MOst people i know who graduate end up getting these internest only loans or just spend everything they have in the name of their home and are saving nothing! I know two people who are married and graduated (there both engineers making about 110 before taxes) and there spending everything they have to live in a little 2 bedroom condo out here and get their expensive cars and live paycheck to paycheck. I know another guy whose single moved out to Texas as an engineer and has his own house but for a fraction of the cost out here and saves plenty.
I keep telling everyone to move where its more affordable and save up more but everyone out here is so stubborn and insists on living in California and they drive the prices of the homes up and will either end up going into bankruptcy or just save zilch.
Dont you miss the days when people were actually ashamed to go bankrupt? It seems like these days people just do it left and right as a way to fix their problems, i hope the bankruptcy reform fixes this.
It's insane and has to give somewhere. I bought a home in 1995 for 300K and I recently had it appraised at 1 million. How can anyone not argue that making 700K in 10 years on a 100k investment (my down payment) is not the sign of an overheated housing market? What I don't understand is who is buying these homes? I could not afford my own house unless I had a 500K down payment. The high government salary in this area is about 130K which means a dual income family with both earning the highest salary will only make an after tax income of about 160K. You can't buy a million dollar house on 160K a year. Something is wrong.
As far as i can tell the reason housing prices are through the roof is because back during the .com boom people who were doing well started snatching up houses and paying above the asking price to just get the house outright and avoid competition. As a result of this process of people who kept bidding higher housing prices went up and up and up. Then as stated above interest rates went low after 9/11 and peopel started snatching up more houses but often at a more expensive value than they could really afford and that drove prices up. This process over probably 10 years drove prices to triple in 10 years. I know my parents home has almost quadrupled since they bought it and as much as i like my old house its not worth that much to me.
I don't get the California mentality. The ONLY asset they have is the weather, and to me weather ain't all that important. Spend a million bucks on a tiny sh&tbox of a house, have a nightmarish drive to work, horrible traffic, bad schools, freaks and geeks all around...but great weather!!
Then you have Ohio...affordable housing, Midwestern values, reasonable traffic, great sports venues, and good weather at least 3 months of the year.
I heard about some folks the other day who "own" a home on the beach in Southern California worth $6 million. They pay $2400 per month on an "interest only" loan. In other words, the bank never expects them to pay on the principle. I guess they are pretty confident of selling the house for a profit.
Exactly! Everybody out here has this oh i must stay here for the weather or bust mentality. They think the world revolves around California and refuse to leave. I keep telling them that if the sun is such a big deal then they can move to Arizona/Texas where there is plenty of Sun. Then they make up some excuse about the beach and how california is unique but thats crap because most of these people dont even go that much to the beach and there are other big cities out there. I see so many people buying tiny houses that are #@$#@ for their dollar value where you could move elsewhere in this country for a better deal.
ALso another problem here in SoCal is that people go nuts with their cars, everyone has to run off an lease the hot new car so they dont feel inferior or something on the road since everyone out here seems to think that you are what you drive and its a mobile sign of your wealth/status. Kind of funny isn't it, for such a liberal state they still place a great deal of value on monetary value.
When we built it our cost for house and lot was $23,300. when I sold it I got $125,000.
My daughter and grandchildren just returned from Naples this past Sunday (she attended her 25th class year reunion) In a conversation with several classmates they informed her that "the house we lived in" would sell for at least $700,000. in todays market. (I'm not sorry I retired and moved) I will make this comment about the whole subject though, anyone that would pay $700,000. for that house has more money than brains. There is no way in he** that house is worth that kind of money. I don't care how bad someone wants to live in that area.
That cant be right, i doubt they bought a 6 million dollar house for a 2400 per month interest only payment, maybye if it was valued at leass but that seems kind of shady to me. I ran the numbers for an interest only loan, at 3% a 1 million dollar house is 2500 dollars, so i dont know how they have a 6 million dollar house at 2500, unless the house went up 6x in value which seems highly unrealistic even here in california... Even if they did get it at 1 million you'd have think theyd have dumped the home by now for a 5 million dollar profit.
We have sun here too! It's just obscured by clouds...LOL...actually, while the West as a whole gets more sun than the East, we actually have more sunshine in the summer months than Tampa, FL does...only in summer though, we have some of the cloudiest winters in North America.
Yes, it is insane. Here, you can live in a decent suburban area with clean homes and good neighbors, spend $135,000 and get a nice small (1100 SF) but clean 3 bedroom ranch on a half acre. Or go all out, and spend a quarter of a million on something that would cost 1.75 mil in LA.
That's a good point. I heard that second hand so I could be wrong.
bttt
That second picture is beautfiul, wheres that from? Yea i dont mean to be ragging on OH or anything im just saying what other people say out here when i try to convince them that moving is probably a more viable option than staying in Caliornia.
It's interesting because i think more and more people are starting to wise up and get the idea and move from these blue states to red states where things are cheaper and more sensible. Its ironic because most of these blue states are all screwd up and ultra taxation because of these liberal policies so i hope its republicans moving from their old blue states to new red states. I hope its not these blue state liberals moving to red states where they get to enjoy the benefits of living under republican government versus liberal government because the problem with that is these liberals bring their politics with them and as such end up screwing the red state up in the process. you think these people would figure out why their states were so messed up in the first place, because of their politics! look at new hampshire, all those overtaxed massachusets people are leaving MA and going to NH and as a result taking their liberal politics with them screwing up the state as a result.
It's like the union workers who wonder why their place of work was shut down because they coudln't compete anymore.
That second picture is beautfiul, wheres that from? Yea i dont mean to be ragging on OH or anything im just saying what other people say out here when i try to convince them that moving is probably a more viable option than staying in Caliornia.
It's interesting because i think more and more people are starting to wise up and get the idea and move from these blue states to red states where things are cheaper and more sensible. Its ironic because most of these blue states are all screwd up and ultra taxation because of these liberal policies so i hope its republicans moving from their old blue states to new red states. I hope its not these blue state liberals moving to red states where they get to enjoy the benefits of living under republican government versus liberal government because the problem with that is these liberals bring their politics with them and as such end up screwing the red state up in the process. you think these people would figure out why their states were so messed up in the first place, because of their politics! look at new hampshire, all those overtaxed massachusets people are leaving MA and going to NH and as a result taking their liberal politics with them screwing up the state as a result.
It's like the union workers who wonder why their place of work was shut down because they coudln't compete anymore.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.