Posted on 10/01/2007 12:51:04 PM PDT by 2banana
Most anybody in the mortgage business will tell you that August was a month that will live in infamy: The market was in turmoil, as doubts about the stability of subprime loans spread to other sectors of the mortgage world.
How bad was it? A survey of mortgage brokers suggests that one in three consumers who recently signed purchase contracts canceled in August -- up from just 4 percent three years ago, according to the research firm that conducted the survey for Inside Mortgage Finance, a trade journal.
The cancellation rate undoubtedly was fed by two scenarios playing out: Many buyers couldn't get mortgage approval because lending suddenly tightened; or, financially strained lenders yanked funding from their borrowers at the last minute.
But another factor was at work: Sellers -- not buyers -- were in trouble as their closing dates neared.
"Our office had four sales in one week that failed to close because the seller didn't have the cash," said the real estate agent, who declined to be identified because she feared office repercussions.
The sellers couldn't come up with the money?
...
(Excerpt) Read more at chicagotribune.com ...
Us folks in Seattle are only up 6% from last year, Doomed Indeed :*)
Except for first-time buyers like me whose income directly depends on the real estate market...as prices fall so does my income.
I lived in Seattle for two years and really wanted the city fathers to tear down those UGLY Craftsman houses and go Manhattan or Singapore with high rises.
I feel for you. I spent much of my younger years dependent on trade with Latin America, and when the ‘98 Thai Baht/Russian Ruble emerging market meltdown came, we really got hosed.
I’m thinking 1-2 years is the right time to buy.
I’m sitting on cash.
I know several people who screwed themselves royally. They either were building a house when the market crashed or got into a no principal loan. When they complain, I remind myself they made the decision to do those things. You have to plan for stuff like that.
If it sounds too good to be true, it probably is not true.
Meanwhile, we are making lots of home improvements.
That’s probably a reasonable bet.
However...you might be able to snag a good foreclosure sale now and come out well ahead...if you know where to look.
Don’t try to time the peak. Wait until the market has clearly turned the corner. They’ll still be plenty of upside.
Our dopey, Dem Governor is trying to stick us (the citizens of Wisconsin) with a 6% title transfer fee. That's on top of the 6.5% Realtor's commission. And yet the idiots around me re-elected him! Go figure.
No one knows.... I just know when I will buy my FIRST !!
= )
I have a relative in another state who owes 1.2 million on a house he purchased 7 years ago for $600,000. That’s right, he’s eaten into the equity for 7 years. He can’t possibly at this point make enough money on the house to pay what he owes and settlement costs on top of that. I don’t know how he makes the house payment.
He hopes he can get 1.3 mil. I’ve looked. Now that the market tanked, I think he can get 875k - if he’s lucky.
Try renting your townhome out. Friend of mine was in a similar position and now has a net positive $150 in income each month and was able to move to a place he wanted to for a better job.
I like what Louis Rukeyser used to say, nobody rings a bell at the bottom.
All of those factors are gone. Therefore prices will come down. Because there will not be a selling frenzy to drive the decline, that decline will be slow but will nevertheless be significant. I would not be surprised to see a 25-30% decline between the peak of 2005 and the bottom of the market.
But who really will be hurt by the decline? Those who have owned their homes since 2002 will be fine. Those who purchased their first home with little or no money down after that will be fine from a financial perspective. Those who refinanced their homes to buy products or services they otherwise could not afford presumably enjoyed those products or services. Even flippers will do ok unless they started flipping in 2005 with real down payments or got greedy and tried to flip multiple homes at the same time.
The only people who will be hurt by this decline in housing prices will be (i) those who purchased their first home with a substantial down payment after 2002 and are forced to sell before prices recover, (ii) real estate agents and loan brokers, many of whom will be inquiring whether you want foam or no foam in a couple of years, and (iii) investors and funds who hold securitized mortgage debt and who will learn that their contractual rights to return their instruments if the underlying mortgages default are ephemeral (in other words, they will learn that investing still involves risk).
Rescuing a very small number of home owners, allowing mortgage brokers to avoid becoming barristas, and bailing out billionaire hedge fund managers who mispriced risk does not justify endangering Fannie and Freddie a further trashing of our currency.
stick us (the citizens of Wisconsin) with a 6% title transfer fee.
The bank holds the paper. The paper has a value to them which may not be the current market value.
They keep the value up to keep their financial balance sheet looking good. If they allow a sale at a loss, they have to record the loss on their books and explain it to their shareholders.
If they take back the house they can keep the value of the house at the paper value they originally loaned it out for. So it benefits them to keep the house, touch it up a bit and sell it when the market is ready to pay the price they want.
The banks are the true owners.
When we ‘buy’ a house via a mortgage, we are not really buying the house but buying an option to one day own the house. Until we own the house, the mortgage lender is the true owner.
There was a case where a couple bought a home on two platted lots that had been consolidated as one tax parcel. One lot had the home constructed on it and the other was vacant. They took out a mortgage on the entire property for $547,000. The property was in a prime area and more than doubled in the eight years they lived on the property and paid the mortgage. The vacant lot portion of their property which they had landscaped into a garden was separately appraised at $650,000 and they decided to file with the city to subdivide the property. They got approval and decided to sell the vacant lot.
The mortgage bank stopped the sale saying the mortgage had to paid off first before any portion of the property could be sold unless the entire property were sold. The homeowners told the mortgage bank they would be paid off in escrow of the sale of the vacant lot. But the mortgage bank (Chevy Chase Bank) said that the entire property must be sold.
Long story short; couple got a lawyer who reached agreement with the mortgage bank. The bank had feared the subdivision would leave them holding a lesser property for the same mortgage amount even though the lot with the house on it was also appraised at a higher value than the mortgage. They agreed when a lawyer got involved because that gave them assurance their asset would be protected.
That’s how banks think. It’s their asset and not the asset of the person who signed the mortgage.
I agree! I bought in an OK area in CA 10 yrs ago for $285K, the house value went up to $700K but since then has dropped to maybe $600K—but I don’t care, because the great news is that now, 4 children later, we can afford to buy a larger house in an area with better schools, an area where housing prices have finally started dropping too. . .
I agree. We purchased our home in 1985 for $32,500 at 12%. We were able to refinance down to 5.67% and the house was worth $150,000. It’s come down to about $145,000, but that’s still over 100 grand more than we originally paid.
We didn’t refinance for the full value, just took some of the equity out, but all in all, in great shape. We’d have to drop another 45 grand to start worrying. Even in Michigan, that’s not likely.
I guess that sometimes it's great to be a seller and sometimes it's great to be a buyer - too bad I'm not in the market. I'm one of those freaks who bought within my means and am thinking of writing a check to pay mine off 14 years early. That makes it hard to cry for those who thought that paying half their income on a house note for a couple years and then hoping that it wouldn't actually rise to 90% of their income when the ARM "matured".
I am 21 years residential real estate appraiser and also hold a broker's license. Here in east-central Florida (Orlando-Melbourne areas), residential property values are for the most part late 2004 prices, meaning, any gain during the BOOM of 2005 are wiped back. If you bought a home in 2001 to mid 2004, you probably have decent equity if you didn't refi since you purchased.
We still have a HUGE inventory of housing. Come and submit a bid! :)
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