Posted on 06/28/2006 5:41:05 AM PDT by Hydroshock
Welcome to the party. It's been bad in Michigan for 2 years, and has been especially bad the last 6-8 months.
The asking price of homes is directly influenced by what the Realtor thinks they can get out of a home. But value has to be discovered by the potential buyer before any price can be justified.
I know the new home market is slowing some because I do the masonry on those homes. Work has been slow for a couple of months, but picking back up for us next week as some of our primary contractors have started building again. But some are sitting on inventory still.
The three things that create a slow market.
1. Interest rates. Pretty much self explanatory.
2. Inventory of homes for sale. Many new homes have been built. There are many older, empty homes left on the market that need to be filled. As new home prices and interest rates climb, some buyers will have to settle for older homes.
3. The perception of, and higher energy costs hurting disposable income across the board for potential buyers. Building materials have risen 4 to 15% depending on the material, increasing costs to builders and causing price inflation on new homes. Some materials are rising so fast in price (copper wiring for example) that it is hard to bid a price for 30 days down the road and come out at cost projections.
This is causing inflation in the construction costs, driving up prices.
At what point do profit margins become too low before a builder stops building?
When builders have to discount the selling price. And when the builder has to pay higher interest rates on a construction loan that sits unsold for more than 3 months.
We are seeing that scenario unfold right now. And with the Fed meeting today, an interest rate hike may be the nail in the coffin for the housing boom.
I purchased my first home in the early 1980's and paid nearly 16% interest on it. It nearly wiped us out! We had to relocate 3 or 4 years later and sold the house for the payoff, losing everything we had put in to it including a 20% cash down payment. We lost thousands of dollars in walking away with nothing.
It can get a whole lot worse than 7 or 8% interest, believe me. Thank goodness there are no Jimmy Carters lurking as presidential material.
I think higher energy costs during that recession cycle had a lot of bearing on inflation and interest rates. I can see parallels in the current economy that could lead to a similar scenario if it is mismanaged like Carter did.
Queen Anne has shot through the roof. The falling apart ones start at 500K. Decent condos start around 370K.
If you want a nice home on Queen Anne right now, your looking at around 700K starting.
In Central Missouri a new 1800 sq ft home will bring around $180,000. Compared to other parts of the country, this a a bargain. A lot of people are retiring in the area after cashing out for double to triple the price from places like California.
If those existing home markets are cooling, relocation becomes harder and more costly.
God I hope Cali's don't start moving to MO; they'll ruin it like everywhere else they go.
On another note, is it bad to buy a house that has been unoccupied for a year?
Not having someone living in it to keep a constant temperature as an example.
"Sales in Tampa plummeted 35% YOY from May 2005. Nice try.
http://media.living.net/releases/May%2006%20Sin%20Fam%20Ex%20Chart.html"
That's units. I didn't talk about units, I talked about prices.
The investor/speculator is out of the market.
People are still moving into the market to live.
They just aren't buying....
Used to be no one thought much of a 3-4 month selling time. Or even longer.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
It used to take two months to get a loan approval.
Do you see what I mean about reality being blurred, here? $250K is not "lower market." How many "lower-middle class" families can really afford to purchase a $250K house? Sure, they could using an 80/20 ARM/HELOC, but that is not reality...that is idiocy.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Amen, the vaunted "affordability" factor and the high rate of home ownership are absurdly overstated. People who owe more than their home is worth are counted as "owners" and if loan requirements were set back to 1960 standards very few could qualify for a home loan.
Ooooh goody, it's gonna be good to be a buyer in about 6 months. The wife and I want a home base, not a flipper, so this is good news for us.
my brother sold his house before they even listed it. Two different people drove by while they were in the process of moving out and made offers. I was shocked. The trick was not to overprice it. They made a few thousand dollars on it, but were mainly just trying to get out from under the old mortgage after they had moved into their new house.
The thing to understand is that Real Estate is a series of small markets and that there is very little in play regarding absolutes in a national sense.
The Tampa-St. Pete market is very healthy. A six month inventory has historically been considered a balanced market. That is where we are now.
Our job market and population figures are very strong and as builders slow activity in the suburbs and gas prices remain high our core neighborhoods will continue to appreciate, although not at the current pace.
Now... I'm guessing your from Pennsylvania... very different market. Blue state, flight of industry, high taxes. You probably have a big giant bubble....
Hmm lets check zillow.com and see how the houses are doing in 92118, Coronado, Ca.
Yeah, interesting isn't it? We had ours approved in 2 hours, on the phone, with a mortgage broker that we were referred to and just called. He took our SS #s and called us back with the OK. And at the best rate going at the time for 30 yr fixed. It is truly amazing what good credit will get you.
And for the kicker, my wife had just quit her job. They didn't care.
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.