Posted on 12/13/2006 4:40:07 AM PST by GodGunsGuts
Wednesday, December 13, 2006
Falling prices trap new homebuyers
Neighbors in a new Garden Grove tract say a developer's plan to slash prices by about $140,000 has left them owing more for their homes than they're now worth.
By JEFF COLLINS
The Orange County Register
(Excerpt) Read more at ocregister.com ...
Only in certain buildings within the cities of San Francisco and Berkeley. All of the newer mid- and high-rise buildings downtown are not subject to rent control (and there are a lot of them), and it doesn't exist anywhere else in the Bay Area. The advertised listings are market-priced units.
I've seen that too. Scumbags.
I have NO problem with legitimate flippers. If they really fix the house, and sell it at a price other repaired homes are going for, fine.
I was using Japan to illustrate that there are situations in which demand so evaporates that lowering rates becomes the equivalent of pushing on a string.
Pretty much.
Negative-amortization loans. The payment doesn't even cover the interest at first, but increases for 5 years, then BAM you start paying principal and the payment doubles.
These loans have existed for years but only in specialty markets. The idea was that the borrower could still afford a traditional payment but wanted a temporary respite to invest the money elsewhere or something. But when Joe Six-Pack was using these loans as the ONLY WAY they could afford the house, it's a problem.
That's true. Homes in hot markets have reached the limits of affordability. However, my point is that falling interest rates make a widespread real estate crash less likely.
Its worth seems to matter a great deal to the county tax assessor and I have to pay him what he says.
Bump. Good analysis.
And btw, we are also starting to push on a string here in the USA.
Exactly. The best financial advice came from Dickens' Mr. Micawber (if only he had followed it himself...):
""Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
Could happen. I'm covered as are my family members. God alone knows about my neighbors, many of whom bought into the area at price points that are a multiple of what we paid. I know a few that are just getting by now, with both working. I'm sure that some banks are going to take a hit.
not always
here is an example
This 2BR/2BA 1362sf condo is for sale for $1.95M on the UWS of Manhattan overlooking the Hudson River.
http://www.corcoran.com/property/listing.aspx?Region=NYC&ListingID=919576
Assuming 10% down, Total Monthly Payment of mortgage w/ maintenance and tax abatement is: $12,611 a month. those taxes WILL go up tremendously.
The EXACT same apartment is for rent in the same building for $5,450 a month
http://www.corcoran.com/property/listing.aspx?Region=NYC&ListingID=919146
So in the rent vs. buy calculation, here it costs 231% more to own than to rent. I have nt taken any tax deductions, but lets assume anyone earning enough to swing this place is getting taxed up the wazzoo.
Any lot with a view will run a minimum of $100K / per half acre these days. No septic, no well, no drive, just a gravel road to get to it.
Dude, I live in the Bible Belt.
But as heavily regulated as our economy is, it's hard to imagine that this sort of scheme [i.e. non-constant, INCREASING mortgage payments] would be legal in a mommy-state socialist paradise like The People's Republic of California.
On the other hand, traditionally the real estate bidness has been dominated by RAT scum like Mr. Diane Feinstein, and Mr. Geraldine Ferraro, so you can see how the RAT-controlled state [& even federal] legislatures would turn a blind eye to this kinda insanity [and even go so far as to "guarantee" these scams with government-backed insurance policies].
Well, that's the whole con game being discussed here - people have been getting mortgages with artificially low monthly payments in the first 2-5 years, that "reset" to a higher repayment rate later. It's a way for mortgage companies to keep getting an ever-dwindling supply of new buyers into ever more expensive homes. The idea is that these buyers would refinance later, before the reset or ballon payment was due, or that they would sell the house with a nice equity gain before that time ever came. The other implicit assumption by the lender (almost never borne out in reality) is that the buyer's income would magically go up enough to cover the doubled monthly payments.
It looks like a good gamble if you believe house prices will keep inflating 20% a year, forever, or if you fall for the realtor/lender scare tactics such as: "This could be your last chance to own!!!"
The ones that really get screwed are single homes on acreage and not in a subdivision. Where I used to live, my 2.5 acres was valued at $250K just for the land, let alone the house. And, they tried reassessing every two years like clockwork. How much did the neighboring subdivisions go up? Not much because they were a bigger voting block and tend to rebut in groups, something the assessors can't abide with because of scrutiny from the higher ups. So, what they'd do is try to force acreage owners to sell because of high taxes, and it usually worked. I sold my house for 5 times what it cost me, but the value before sale was $150K less than what it sold for, thanks to constant protesting.
No. They are asking prices of units that have not yet rented.
In a hot market - which sadly used to exist - advertising like that was the last resort.
My best friend retired early and moved to Vegas about 6 years ago. Within 3 years, they flipped their house and doubled what they paid for it. They put it almost all into a nicer, brand-new house in San Antonio, with hopes of doing the same thing. I'm not so sure that will be that easy.
To the people who have been successful with that tactic, I say more power to you for your good timing. The problem is with people who jump on the bandwagon at the wrong time.
Oh well, maybe I'll be able to get a good deal on a second home when I retire next year... ;P
On the contrary - it leads directly to higher property tax revenues. Democrats love it. ;)
This only seems unfair if you assume everyones income has kept going up. We purchased our home in 1985 and it is true that we pay less property tax then someone who purchased the same model home across the street in 2006.
The point is, I could not afford to buy my home at today's cost.
I am close to retirement, my home is paid for, my property taxes is a managable $1,200 a year (it does go up a small bit each year). This is one thing that makes retirement possible.
So while it may seem unfair to base property taxes on what someone pays for their homes, it is really the only fair way. Otherwise we would go back to those days, when older retired people would lose their homes of 40 to 50 years because they can no longer pay the property tax, then where are they to live?
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