Falling prices trap new homebuyers

The Orange County Register ^ | December 13, 2006 | JEFF COLLINS

[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

[FreedomCalls]

If it's worth saying, it's worth repeating.

[gitmo]

$870,000 for that house? You could score something like that for 1/4 the price on the east coast. I can see appraisers in that area getting their butts chewed by the loan officers and realtors when appraisals start coming in significantly below sales prices.

Funny, we were talking about that in the office today. Folks from the left coast and from up north are moving down here, and grabbing houses at whatever price the seller is asking. Very few home sales involve negotiating over the price. One lady in the office just sold her house for $30k more than what she asked. The yankees got in a bidding war over it.

[BurbankKarl]

They are stuck if they re-fi'd

[KevinDavis]

Falling prices bad???

[Texasforever]

I think new Federal laws don't allow people to walk await from mortgages anymore. They are stuck I think.

They never did. If you walk away and the house is sold at auction, the IRS will stick you for income taxes on the balance left over after the sale.

[Pelham]

You can't imagine how many times I've heard "Orange County is different. There's too many people who want to move here for prices to come down."

[Pelham]

That is very likely a 2,000 sq ft house with no yard. Houses were going for 440 per sq ft here.

[Pelham]

Are you saying that banks in SoCal were making home mortgages with non-constant monthly payments, i.e. monthly mortgage payments that increased over time?

It's not necessarily banks, but those loans have been the main driver of prices here over the last three years. Option ARMs, negative amortization, 100 percent financing, no doc loans.

[A CA Guy]

In the case of prices going down and homes having no equity, I don't know who would refinance that BK.

In general, lots of short term interest only loans are out there and are going to wipe some people out.

[A CA Guy]

What I meant to say is that the national picture on real estate looks more these days like Texas in how they handle walking away. Califonria used to be easy to walk away and I think new laws have changed all that TF.

[Porterville]

More of your financial genius? You don't have any understanding... will you stop already or do you intend to show that passing the GED really doesn't amount to much?

[Texasforever]

Well the new bankruptcy law probably makes it easier for the lending companies to keep the owner from full chapter 7 relief but the IRS rules have always stuck the owner with income taxes on the balance after foreclosure sale. I know several people that walked away after the housing bust in the early eighties and believe me, the IRS went after them with a vengeance. There were NO loopholes and there was no way they could file bankruptcy on the IRS.

[A CA Guy]

I remember a similar issue with people who took stock but had to hold onto it by contract for another year.

Somehow there were people a while back who lost everything that way as well.

[Lancey Howard]

re: your post #9

Perfect!

"It's not just the financial aspect. It's the emotional," Dunn said. "We can't eat, can't sleep. I can't concentrate on work. This is all I think about."

This guy is distraught because other people got a better deal than him. Must be a California Democrat.

[Greenpees]

I bought in 96. Refinanced with no equity withdrawal and got a 5.75 Fixed.. in 2004.

CT has been nice to me. The market doesn't jump around too much either.

[goldstategop]

Computed at 360 months mortgage it comes out to $2,160,000. That's a lot of dough.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[Fierce Allegiance]

so I have backup I am not the liar, eh? Thanks, Gp!

[GodGunsGuts]

Speaking of genius. Make up your mind, hypocrite.

http://www.freerepublic.com/focus/f-news/1468033/posts?page=193#193

[TheLion]

I've been in the same house for 16 years. Almost 1/3 of the mortgage payment comes back every month in increased equity. It would cost me $1000 more per month to rent in the same development. I also don't own in an area which is speculative. Very solid people here. It is all about location and markets.

A friend in El Paso said real estate is booming there.

Renting is not smart for the long term.

[goldstategop]

That's $4170 income rounded a month with $1390 mortgage payment rounded a month going The latter more than the median in California and a third of the household income is going to the mortgage payment. If we drop the income to 3180 rounded a month, a little under half the household income goes to service the mortgage. Now let's drop that to the $25,000 most people typically earn: 2090 a month - over half of the household income goes to pay the mortgage down. When other expenses are factored in, that means there's nothing left at the end of the month. Economists say ideally one should pay no more than a third of one's monthly budget on housing. Its often a great deal more. A lot of people rent since they dont want to live on rice and beans the rest of their lives.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus