Posted on 11/20/2005 12:23:42 PM PST by ex-Texan
Nice, succinct description of the mentality behind the California real estate market. The concept of "carrying costs" is completely lost on these people...who are busy fantasizing about what kind of BMW they can buy when they get a home equity loan against their soon-to-be-appreciated value.
This is the 1000the post in the real estate bubble series by ex-texan. The reality is this is mostly scare-mongering. Real Estate in most areas will be just fine, although some places there will be a fall back. Look for construction to slow down in most areas and some increase in foreclosures as rates go up. For most people there will be very little direct impact. Even those in affected areas the vast majority will just see some of their appreciation disappear. Few people will actually lose money, but we will read about everyone who does.
The real question is: how will plunging/declining/ dipping/ etc. home prices impact the rest of the economy? A lot of folks have been pulling huge dollars out of their homes in the form of equity loans and a lot of jobs are dependent on home sales, building and renovation.
What did the economy do before the real estate boom? Haven't we been in growth since say, about the time Ronald Reagan got elected?
"...plus if the tax reform passes whereby mortgage interest is no longer tax deductible, look out below."
It's not going to happen. Even if it did, the proposal doesn't do away with the mortgage interest deduction, it lowers the cap on the maximum deductible amount from $1,000,000 to somewhere between $142,000 and $412,000, depending upon the average price by location. It also would shift from being a deduction to a tax credit equalling 15% of mortgage interest paid in a given year, up to the applicable cap.
I'm starting to understand why your freeper name is "always right". Good point.
You sure post a lot of these "Real Estate Bubble Burst Articles"....almost a tongue twister. Where I live, people have taken their properties off the market since we have experienced a slowdown. Also, most here can afford the costs and don't have to sell. While I will agree that there are problems, it depends what market location you are talking about.
I couldn't rent for what my mortgage of 15 years offers me. There are many of us out here that take owernership seriously.
No, there was a mild recession to middling recession in the early 1990s followed by slow recovery, followed by a slight recession in 2001/2002 bolstered by housing.
Si hoc legere scis, nimium eruditionis habes
"No, sold out of California a long time ago."
So you missed out on the crazy ride upward in price? I find myself rueing a decision not to relocate to CA in 1999 for a job opportunity. I even went so far as to shop houses, which I thought were bizarrely pricey even then. Found a little 1250 sq ft ranch in Half Moon Bay with a partial view of the Pacific, that needed every repair imaginable, for $325,000.00. It would have more than doubled since then, I'd imagine. Oh well, water under the bridge, lol.
"Congress will be called upon to bail out the people that took the "interest only" loans in order to buy more house than they could normally afford."
Congress should sit on their hands and let those people be thrown out on the street!
I live in a suburb of Washington, DC. A few months ago a pleasant, moderate-sized house--not the biggest or handsomest house in the neighborhood--sold for $700K. It took only a few days to sell. A month ago another house of the same size and floor plan went on the market for $640K. It has not sold. There was supposed to be an open house at this house today and I noticed that no auto traffic had even headed in that direction all afternoon. Seems as though the bubble has already popped around here.
bump.
"A month ago another house of the same size and floor plan went on the market for $640K. It has not sold. There was supposed to be an open house at this house today and I noticed that no auto traffic had even headed in that direction all afternoon. Seems as though the bubble has already popped around here."
A month is not a long time at all, for a house to be on the market, by historical standards. And, also by historical standards, the holidays (Thanksgiving through New Years) are a horrible time to try to sell a house. Nobody is looking, because they're preoccupied. Very few people would uproot themselves at this time of year, either. So, if history is any indication, the seller's bad timing will mean that they'll be waiting until the first of the year for much interest, or they'll have to reduce the price further to capture the bargain hunters.
Is this a bubble bursting, or just coming back to earth and behaving as residential real estate has always behaved? January will tell.
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