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 ...
Which reminds me that the leading consumer complaint (by FAR the leading complaint) about the Hummer H1 was getting poor gas mileage. In the words of Carlos Mencia, you have to be a little "dee-dee-dee" to buy one thinking you would actually get anything approaching respectable mpg...
I disagree. The cost of government will continue to grow as long as they have a ready source of income. One of the side goals of Prop 13 was to cut the funds from governements. It has not worked out as well as we could hope, but it has slowed them down.
The road in front of my home has not been improved since I moved in. I have never had to call the police or fire. I have no children in public schools, and I pay extra for trash pick up and water. I am not a burden on my local government.
I live in a small town in Central California. The population has almost doubled since I moved here. New homes (and there are a lot of them) go for 400-500 thousand dollars. Aside from that, new business have been created along the freeway that is within city limites, the city gets a share of the sales tax from these businesses.
The local government is not hurting because I only pay taxes based on the price I paid for my home twenty years ago.
On your next point, it does me no good that you had a career that went as well as yours did. I am happy that you were able to earn as much money as you could. Please feel free to donate as much extra money to the government as you wish. But your good fortune does not translate into money into my pocket.
I overcame some high hurdles to enable me to learn a skill that would pay me a modest wage. My abilities, knowledge, and opportunities were never such that I could hope to duplicate your success. That fact does not mean I should lose everything I have worked for just so the local governement can have more of my money.
No sir, fair is taxing the property for what an individual could pay at the time, not on the possibility that they may at some future date be wealthy.
Mass. foreclosures jump 300%
http://www.freerepublic.com/focus/f-news/1752847/posts
"The place was an absolute dump. The grass was brown and they spray painted it to look like a golf course."
And that's why I would NEVER buy from them. Most of the episodes I've seen them on they've used a cheap method to cover up problems rather than properly fixing them.
A home isn't worth a dime more just because the floors have been refinished if the foundation is still split in two, IMO....
Of course, people rarely look at the important details when buying a house. The color of paint on the walls is more important to most people, it would seem.
Don't paint with a broad brush. There are flippers who do things right and actually FIX the houses they buy, legitimately.
Many though do nothing but speculate and drive up prices for no good reason. Buying them up, to create more scarcity.
>> If they bought the house as a long-term residence, so what?<<
I agree. 'Course, a large percentage of people even in that position found themselves having to take out negative amortization or similarly "risky" loans with their salvation being in the increased value of the home down the road - which now will not happen soon enough.
The stats on the number of this kind of loans recent popularity should give shivers to anyone who understands that prices cannot go up every year at double digits.
The pyramid scheme has hit saturation. They simply cannot manufacture any more demand without allowing dead people to qualify for loans.
Hey if that's what they do, so be it. There are no guarantees in life. Again, I will not feel sorry for anyone who loses his shirt when housing collapses in certain areas.
Excellent summation. I hadn't thought about all the echo bubbles that could be created as people relocate. Sounds like there will still be money to be made in RE in the relocation areas. Interesting stuff...
From another article in today’s WSJ titled First-Timers Begin Looking At Houses Again:
“In much of the country, renting remains a bargain compared with owning, according to an analysis prepared for The Wall Street Journal by Torto Wheaton Research, a unit of CB Richard Ellis Group Inc. In markets such as Las Vegas, San Diego and Washington, the monthly cost of renting the average apartment is roughly half what it would cost to own the median-price home in the third quarter…”
Here’s the table. Rent vs. Own Ratio
City 2001 2006
Atlanta 1.01 0.82
Boston 0.87 0.63
Charlotte 0.85 0.66
Chicago 0.84 0.68
Dallas 0.94 0.89
Denver 0.65 0.57
Houston 0.90 0.83
Indy 0.93 0.93
Vegas 0.83 0.49
LA 0.82 0.46
Miami 0.89 0.52
Minny 0.84 0.72
Orlando 1.03 0.58
Philly 1.07 0.81
Phoenix 0.86 0.54
SD 0.61 0.38 (!!!)
SF 0.67 0.42
Seattle 0.60 0.45
Tampa 0.98 0.66
DC 0.82 0.51
US Average 1.02 0.79
Comparison is 2001 average vs. 3Q 06. Mortgage costs do not contemplate taxes/ insurance/ assessments/ maintenance nor account for interest deduction.
What you can't really see in that picture is that the lot would not fit a standard mobile home. Notice how close th sidewalk is to the homes walkway. And the back yard may be slightly larger. Notice how close the house is to it's left, and the picture crops out the house on the right wich is just as close.
It is time to sit back and watch this market implode and pick up the pieces in a year or three - or 15 if it gets as bad as Japan did.
Nooooooooooooo!
If that ever happens, let me know.
But then you’d have to live in Texas.
I spent the first seventeen years of my life in southeast Texas. Spent about the next 10 years throughout the southeast from Lake Jackson to Apalachicola.
I always remembered that part of the country fondly until I went back to visit. LOL.
That’s when I was suddenly forced to remember chiggers and ticks and fleas and every form of flying biting/stinging insect you can imagine… yellow jackets, hornets – you name it – every color biting fly… poison ivy… on and on.
There’s a *reason* Clute has (had?) their mosquito festival.
Heat and humidity that’ll make you wilt like a lettuce leaf.
$240,000 job in southern California doesn’t really translate to anything anywhere else I’ve ever lived.
My wife has a counterpart at their operation in Portland OR. They have the same title and same job description – but they’re not really comparable positions because the southern California function is MUCH larger and considerably “harder” and it’s in southern CA so nobody wants to relocate here.
Anyway, who has a “better” standard of living – the person making $48,000 in Portland or the one making $240K+ in southern California?
Incidentally, when I put $240,000 into the calculator it claimed you’d have to pull $134,450 in Portland to maintain the same standard of living. Yet the position pays $48K and there’s no shortage of people standing in line to take it at that salary.
As someone who has lived in both places (and intend to return at some point) I can honestly state that taking the California gig will be an experience you will *not* regret taking advantage of – but that’s just me.
If you’re a young kid with a new pregnant wife and no marketable skills I don’t know how you could possibly make it here. Yet they somehow do.
I forgot to mention that we have more exceptionally top-heavy cuties per capita than anywhere else on earth. Not that it does me much good but it’s nice to know…
>>California home prices have been way out of control. Time for a correction.<<
Which will hit the rest of the nation. One of the things driving prices in other areas is people in CA selling, taking their profit and buying elsewhere, increasing demand - and prices - in those areas. If that flood of buyers ceases, it will cascade to one degree or another.
Yes who cares about the flippers. House flippers everywhere deserve to be destroyed financially and I will not shed 1 tear for them.
>>The title of this article is a bit misleading; it should read "Falling prices trap recent homebuyers." <<
Or those who recently refinanced or otherwise have no equity, or even negative equity.
>>That's great news for you. Just remember, housing will fall a lot further before this is all over.<<
Yeah, a house that went for $500k last year and is going for $470k now may look like a great deal, but if the identical home three doors down goes for $320k in a year, it won't look so good. It is really wierd how perceptions can change like that. I've actually experienced it in both directions.
This thing takes strategic as well as tactical thinking.
It's the best property tax plan in the nation and just because you pay more than your neighbor doesn't make it a "large tax disadvantage". When your new neighbor pays more than you, what is it then?... A tax advantage?
Where is it written that just because you chose to spend $500,000 for the house next to mine that I should also pay $5,000 a year in taxes for the home I've been paying taxes on for 20+ years?
It's your purchase that determines the valuation...you should pay more on the value based on what YOU paid.
Nope, there was no bubble. Continuous double digit appreciation is a natural thing to expect forever.
Lots of echo bubbles/ripples are being created as the equity locusts abandon ship and scoop up 'bargains' relative to their original location. It will take time for this to normalize, but the cogs in the relocation machine are starting to break down as sellers cant sell and make the move.
Californians are leaving to Arizona, Texas, Portland, Idaho, & Utah.
Arizonans are being driven out by Californian inflated prices to Texas.
Boston/Mass. residents are going to Rhode Island.
Florida residents are bailing for North Carolina.
Detroit/Michigan sellers desperately want to sell but cant.
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