Two-Thirds of Lenders Nationwide Say U.S. in Midst of Real Estate Bubble

Philadelphia -- (Business Wire) ^ | 4/04/2006 | Biz Wire Saff

[Proud_USA_Republican]

I'm currently in offer stage of buying a condo near downtown Seattle. They listed at 368K, I offered 350K, and it looks like they are going to accept. Heard the guy works in tech, but they have to move to another state for a new job starting next month, so they are somewhat motivated to sell.

Analyzing the comps my realtor has given me. I'd say about 60% of condos/homes being sold are still getting asking price, BUT, the asking prices are more realistic of current market which has been slowly cooling since January. You see many selling for 3 to 5% below the asking price now.

I thought the asking price was just a bit high, so I offered about 5% below price.
Two years ago, sellers with time of their hands were just throwing out rediculous ask prices seeing if some desperate moron would agree. Prices are still pumped up to extremes in certain markets. The property I'm trying to buy is in a area that still has a lot of demand, so I know that even if the market continues to cool off, long term, It's going to be a good investment.

[Proud_USA_Republican]

making money off internet advertising.

[Proud_USA_Republican]

I just bought some goldcorp stock so I just got to say, BOOYAHH!!!!

[HamiltonJay]

[D-Chivas]

You know, eventually certain parts of the country will run out of people able or willing to pay $750,000 for a 2 bedroom ranch.

That's not really a bubble. It's more like the occasional pocket of air rising to the top of your bathtub after an evening of Mexican food.

[RegulatorCountry]

"The property I'm trying to buy is in a area that still has a lot of demand, so I know that even if the market continues to cool off, long term, It's going to be a good investment."

In comparison to single family detached houses, you're hitching your wagon to a lot of fees, in addition to a mortgage payment, taxes and insurance. Maybe Seattle is so built out that there's no more room for anything else that is remotely affordable and within a reasonable commute, but the fees strike me as being a potential drag on resale value.

[divine_moment_of_facts]

"first of all, Zillow is a joke, secondly the million dollar market has never been as robust as the normal market. I don't believe there is a bubble, just a slow down and a correction of the over inflated market. Most areas have already seen a 5%correction."

You are correct on ALL points! Zillow lists prices that are at least five years old. I predicted there would be a slow down in NJ last year.. I was wrong... In fact, prices of new construction has continued to climb.. A home selling for $500,000.00 just two years ago, can't be touched for less than $800,000.00 now. I suspect the market in NJ will eventually correct itself, but I doubt prices will fall any significant amount in this area of the country.

[robowombat]

I think the county really overdid it this time on jacking the assessments up and it is going to have (it already is having) a negative impact on the real estate base. People are really up in arms about seeing their escrows jumping $200-$400 a month on average middle-middle class housing and at the same time it is scaring off perspective buyers and encouraging them to look to Prince William County on the south and counties to the west.

[oust the louse]

"What sluggish job market indeed, we have 8 slots we're having one HELL of a time filling. . . and that's here at the West Virginia office, alone. We have 20+ more positions open in the hell that it Metropolitan Washington DC and the Virginia Suburbs. . ."

Hey Salgak, I'm a headhunter and having a very good year. I just don't get why people say the economy is shaky blah,blah,blah. I just had friends relocate out of Virginia suburbs and they got a ton for their house allthough they paid a handsome buck too! Still made 100k from purchase price...By the way,need a good headhunter?...

[RegulatorCountry]

"People are really up in arms about seeing their escrows jumping $200-$400 a month on average middle-middle class housing"

You can still get not-entirely-embarrassing starter houses out in the county down here for a little over $400.00 a month, and that's including principal, interest, taxes and insurance. I can't even begin to imagine $400.00 a month worth of property tax on my house to begin with, let alone an increase of that amount.

[Proud_USA_Republican]

I just can't afford a decent house anywhere near the city and I'm not going to to do the 2 to 3 hour of commute time a day thing. After that past couple years, I've been priced out the house market around here. If I was married and had a duel income, it would be so much easier.

So the plan is to own the condo for about 3 to 5 years, build up some equity, and save up more for a bigger downpayment, and then step up to a house.

Condo fees do suck, but given the current market, this was my best option.

[wardaddy]

Bubbles don't burst...they just fizzle and not universally

this is primarily a residential longterm uptick

it's been going up homewise here in nashville metro since 91 more or less

and folks just keep coming

[RegulatorCountry]

"it's been going up homewise here in nashville metro since 91 more or less"

Most of the nineties were OK my region of NC, up until the end of the decade, when the offshoring of textiles and furniture manufacturing really began to take hold. Total employment actually decreased from that point up until about two years ago. Home price appreciation slowed during that timeframe, to around 2% annually on average, but some areas were flat, and some were better than average, depending upon the employment scenario in the immediate area, as well as the scenic value (mountains and/or lakes are a plus). Appreciation since then has been 5% on average and increasing. There aren't many large textile or furniture manufacturing operations left to cut jobs, and there have been numerous new companies in diverse fields come into the area. Population growth continues at a rapid clip, and didn't slow even during our "slump" from 1999 - 2004, curiously. We're cautiously optimistic about the future here. Real estate prices are not a point of concern.

[ex-Texan]

Wait until all those millions of people who bought homes in California get notices about their ARM payments. Those adjustable payments are going to start resetting from 2.5% to 7.3% + APR. On a $ 650,000 home that is quite a jump, especially with three years deferred interest tacked on to principal. I estimate loan payments alone will go up from $ 1,360 to over $ 4,500. Quite a bump!

That means about 50% or more of recent buyers in California are going to be SOL. Those houses will be foreclosed. Imagine whole neighborhoods of houses for sale with most sitting vacant. Then the bubble will crash for real. It will be very nasty, very bloody indeed.

I'm talking about next near and the next extending over the next five years. People who manage to keep their homes will wake up one day and find a demand letter from their lender(s). The letter will give them about 90 days to pay the difference between what they owe and the most recent value of the house.

Then, all hell will break out.

[RegulatorCountry]

"Then the bubble will crash for real. It will be very nasty, very bloody indeed."

You know, your replies would be more palatable if you didn't sound like Charlie Brown waiting for "The Great Pumpkin" to arrive. Why the gleeful anticipation?

[thoughtomator]

What? I'm not a tinfoil-hat doom-and-gloomer? I might need to re-evaluate my self-image (and possibly use more hyphens)!

[thoughtomator]

I have gleeful anticipation, given that I'm positioning myself to buy my first home. I do NOT want to pay today's extremely inflated prices. Maybe the half-million I can afford will get me a mansion instead of a middle-of-the-road townhome!

[Old_Mil]

A year ago, 46 percent of lenders believed we were in a housing bubble. Today, that number has climbed to 66 percent - and many of them believe a correction is imminent and could lead to a drop in housing prices of up to 20 percent."

Like you, I'm thinking that 20% is a ridiculously optimistic figure. What is going to happen to all these "interest only" homes when problems occur? People are going to walk away and let the banks take them.

[Centurion2000]

What is going to happen to all these "interest only" homes when problems occur? People are going to walk away and let the banks take them.

Somehow I think the banks will take them instead. Funny how that bankruptcy law just changed last year yes?

[Uncle Miltie]

"When asked to select from a list of six issues that had the most potential to hurt the U.S. economy, 38 percent of lenders named the federal budget deficit."

Which puts their credibility in question. Name the person harmed by a budget deficit of the proportion of GDP we have today. It just isn't that big of a deal.

These bwankers probably want a tax increase to solve the budget deficit.