Home Prices Tumble

[Sultanosurf]

Forget Fannie, and Freddie, this really hits home:

Home prices down 15.8% in past year, S&P says

WASHINGTON (MarketWatch) -- Home prices in 20 major U.S. cities have fallen a record 15.8% in the past year, as prices dropped in all areas tracked by the Case-Shiller home price index, Standard & Poor's reported Tuesday. Prices in 10 cities fell 16.9% in the past year...

Prices thus are at the same levels as they were in the summer of 2004, which means four years of appreciation have been effectively wiped out. Prices are down 18.4% from peak levels seen two years ago. Falling prices have eroded Americans' wealth, cutting into their ability to borrow against the equity in their homes or refinance their mortgages or sell for a profit. Millions of Americans now owe more on their homes than they're worth.

The falling home values could also trigger higher monthly payments...

http://www.marketwatch.com/news/story/home-prices-down-158-past/story.aspx?guid=AE5A1ECB-C182-44EC-AF64-F7A2D7790106

[Angel's Hell]

It's a natural course correction. It happens every time recently the repugs are in office for more than four years: an inflated housing market, and then when the dems come in the market falls to a more reasonable level. The only people who lose are those who do not understand how to have a mortgage where there is room for a profit margin. This means, don't overpay, don't use a high rate, put cash down.

Don't cry about it, if you had any sense at all you'd take this time, if you have an adjustable rate mortgage to get yourself into a low rate fixed one and ride it out!

[HushHush]

Considering the house I sold in May sold for twice of what I paid for ... a 16% loss isn't that much. All the experts are saying to hold out for 2-3 more years for the market to be heading in an upwards direction again. And 5-7 yeras for it to be at a new peak. {Which is when I plan to sell my new house - perfect timing!}

[Mighty Dyckerson]

And 5-7 yeras for it to be at a new peak. {Which is when I plan to sell my new house - perfect timing!}

Is that when you plan on checking in to Shady Pines?

:whistle:

[HushHush]

Is that when you plan on checking in to Shady Pines?

:whistle:

Nope - thought I'd move up to Richmond and in with you.

[TAFKA wacowx]

It's a natural course correction. It happens every time recently the repugs are in office for more than four years: an inflated housing market, and then when the dems come in the market falls to a more reasonable level.

Didn't the most recent bubble occur almost entirely within the Clinton administration? Home prices in New York, DC and San Francisco (that I know of) went through the roof in the 90s...solidly within a democratic presidency.

Or are you referring to congress?

[Mighty Dyckerson]

Nope - thought I'd move up to Richmond and in with you.

OK with me. I hope you don't mind snakes.

[Lazlo Toth]

OK with me. I hope you don't mind snakes.

Better than crabs.

[ISTHISTHINGON?]

I rent....and am not too up to speed on what it takes to buy, remortgage, etc....wouldn't the 'glass half full' scenerio be that people looking to buy a home get a deal? Or is it not that easy?

[Pro]

Didn't the most recent bubble occur almost entirely within the Clinton administration?

There was a red-hot housing market from 2002-2006. It's why so many people resorted to ARM's. The housing market was hot as hell and they wanted in on it. If an ARM was their only was "in", so be it. They figured they could sell in a few years and still make a big profit. Didn't work out that way.

[Produce man]

Better than crabs.Last I heard, you can't give crabs to yourself, so she should have no worries.

[HushHush]

I rent....and am not too up to speed on what it takes to buy, remortgage, etc....wouldn't the 'glass half full' scenerio be that people looking to buy a home get a deal? Or is it not that easy?

Yep - that's the exact reason I bought the house I'm in now. I got it for a steal!

[Union Label]

Didn't the most recent bubble occur almost entirely within the Clinton administration? Home prices in New York, DC and San Francisco (that I know of) went through the roof in the 90s...solidly within a democratic presidency.

Or are you referring to congress?

Actually real estate prices were headed lower for a good part of President Clinton's first term. Many areas were hit with military base closings and the end of the Cold War put a crimp in overall military spending initiated during President George H.W. Bush's last year or so in office. California suffered even worse due to the Northridge earthquake in '94. Real estate started making a comeback during Clinton's second term and remained strong even as the dot.com bust sent stock prices tumbling during President George W. Bush's first term. Prices have only started a downward trend during the last couple of years.

[Jane Craig]

I rent....and am not too up to speed on what it takes to buy, remortgage, etc....wouldn't the 'glass half full' scenerio be that people looking to buy a home get a deal? Or is it not that easy?

If you have a downpayment and a solid credit rating, along with sufficient income to repay, you stand a good chance of getting a deal (i.e., our fiscally responsible friend HushHush). The days of no-money-down and/or no-proof-of-income-required and things like cash-out or interest-only loans are behind us (thank goodness, IMHO).

Meet the new rules -- same as the old rules by which our parents bought their homes. Old-school requirements and old-school mortgages are the wave of the future.

[Lazlo Toth]

If you have a downpayment and a solid credit rating, along with sufficient income to repay, you stand a good chance of getting a deal (i.e., our fiscally responsible friend HushHush). The days of no-money-down and/or no-proof-of-income-required and things like cash-out or interest-only loans are behind us (thank goodness, IMHO).

Meet the new rules -- same as the old rules by which our parents bought their homes. Old-school requirements and old-school mortgages are the wave of the future.

Ain't it funny how the old economic rules eventually assert themselves. Remember that new economy the dot-coms were ushering in.

[Union Label]

Forget Fannie, and Freddie, this really hits home:

Home prices down 15.8% in past year, S&P says

WASHINGTON (MarketWatch) --

Falling prices have eroded Americans' wealth, cutting into their ability to borrow against the equity in their homes or refinance their mortgages or sell for a profit. Millions of Americans now owe more on their homes than they're worth.

Hellloo...One of the major reasons that people are now in trouble is because they borrowed against their home's value.

For the most part, if you own a home with a realistic loan, you've certainly lost money on paper but it really doesn't matter unless you need to sell and aren't planning on reinvesting in another residence. Most of us who've owned our homes for more than a couple of years are still ahead. The people that are suffering now are the ones who bought within the past few years and need to sell now and not reinvest in another home for whatever reason. Prices will turn back around once the foreclosures are sold and the economy recovers. The speculators who borrowed heavily and the dumb banks that loaned them the money to catch the tail end of the bubble are the ones left holding the bag. The moral of the story is that greed will eventually do you in.

The lucky ones are the first time buyers. They will play a big role in helping the real estate market to recover. Right now everything is on sale at a pretty good discount.

[Pro]

The lucky ones are the first time buyers.

First-time buyers who can make a substantial down payment and have recession proof jobs with sufficient incomes, yes. But are there enough of those?

[Brain Cramp]

By HANK STUEVER Washington Post

July 29, 2008, 5:40PM

Symbolic to our era like a sledgehammer to drywall, the biggest house that ABC's Extreme Makeover: Home Edition ever made over — a sprawling, four-bedroom starter castle, a three-car garage mahal with a turret and all — has gone into foreclosure, in the 'burbs south of Atlanta.

In that particular episode of the hyperbenevolent reality show, which first aired in February 2005, it took 1,800 volunteers a week to demolish the house with the overflowing septic tank that belonged to Milton and Patricia Harper, of Lake City, Ga., and then entirely rebuild a new, larger house, while the Harpers and their three children went away to Disneyland. When they returned, they had the biggest house on Ahyoka Drive, with all the appliances and furnishings, plus enough money to pay taxes on it for decades, plus a fund to send their children to college.

The house will be auctioned off, according to the Atlanta Journal-Constitution, next Tuesday on the steps of the Clayton County Courthouse.
The Harpers had used their home as collateral on a $450,000 loan from JPMorgan Chase and fell in arrears, the newspaper reported. He ran a home security business; she mommed at home. Happy to be on television back then, they declined to be interviewed last week, when a news crew showed up from local station WSB, wanting to know what happened.

The mayor of Lake City, Willie Oswalt, who said he'd helped lift a beam into place in the Harpers living room, told the press that "it's aggravating. It just makes you mad. You do that much work, and they just squander it."

[MyracleMan]

We never saw the huge real estate boom like the coasts did... the price of houses triping in two years, interest rates dropping, tens of thousands of people now in foreclosure because they couldn't afford even the interet-only payment. We also never saw the huge bust the coasts did either. Generally, a house purchased for $135,000 four years ago is worth about $160,000 today. Makes me glad, for once, I live in the center of the nation.

[Union Label]

Here are a couple of quotes to keep in mind in today's real estate market:

"Scared money never wins." - Anonymous

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." -Warren Buffett

[HushHush]

... ABC's Extreme Makeover: Home Edition ...

This makes me .. well not mad but disheartened. These people were given a wonderful gift - a second chance of living a decent life. Sooooo many volunteers believed enough in the family to come out and work on the house. And they've basically thrown it away.

I wonder what the home will auction for?

[Scarlet Termite]

Housing prices in Columbus have dropped about 5% since last year. I saw a house on Realtor.com that was in Westerville, 4 bedrooms, 2.5 baths, 2 car garage for 94,500. It probably sold for well over 200k originally.

[Spike]

This makes me .. well not mad but disheartened. These people were given a wonderful gift - a second chance of living a decent life. Sooooo many volunteers believed enough in the family to come out and work on the house. And they've basically thrown it away.

Not necessarily. The article doesn't do a very good job of explaining what happened. Do we know why they took out a loan against the house? There may be good reasons.

For example, I notice that the article does mention that the guy runs his own business. Did he have to borrow money to get the business going? A home equity loan might have been the easiest and least expensive way to get the capital he needed. It's done all the time. In that case, he took a risk, but is that really bad?

Consider the type of business: home security. At the time they got this house, I suspect the home security business was booming. I suspect now it isn't, since it's a business that depends in large part on the home construction and real estate business. It might have looked like a much better risk then than now.

So maybe this family wasn't being as irresponsible as everyone assumes. Maybe they were using the opportunity they were given in an attempt to make a better life for themselves.

[Mighty Dyckerson]

Good point there, Boo.

[Bandit]

If you have a downpayment and a solid credit rating, along with sufficient income to repay, you stand a good chance of getting a deal (i.e., our fiscally responsible friend HushHush). The days of no-money-down and/or no-proof-of-income-required and things like cash-out or interest-only loans are behind us (thank goodness, IMHO).

Meet the new rules -- same as the old rules by which our parents bought their homes. Old-school requirements and old-school mortgages are the wave of the future.It's going to be interesting to see what happens in the next few months. As banks continue to get hit with bad loans, they have to write them off and hence have less money to lend. This in turn leads to fewer mortgages being made, meaning home values continue to struggle since demand lags ... and perhaps trapping more people in upside-down mortgage loans. Potentially a self-reinforcing cycle.

Until the credit contraction ends, which could be measured in years rather than months, any person or business impacted by credit availability is at-risk. (By the way, many large companies that are healthy use credit to finance day-to-day operations. Should that credit cost more, earnings take a hit.)

Hopefully Ben Bernanke or Hank Paulson (or Harry Potter if he's available) can conjure up a cure that doesn't sow the seeds of the next crisis.

[Marty McFly]

There was a red-hot housing market from 2002-2006. It's why so many people resorted to ARM's. The housing market was hot as hell and they wanted in on it. If an ARM was their only was "in", so be it. They figured they could sell in a few years and still make a big profit. Didn't work out that way.

Wow! Aren't you the same guy that those 'same people' shouldn't be losing their homes to begin with?!

[Pro]

Wow! Aren't you the same guy that those 'same people' shouldn't be losing their homes to begin with?!

I said foreclosres are not good for the U.S. economy. I attached no moral views on it.

[Marty McFly]

Sure you did! You said the people that buy the homes that have been foreclosed on are nothing more than 'bottomfeeders.'

I think you said that from atop your high 'moral' horse.

[Another OMB]

I've been wondering for years when the bubble would burst. My wife and I love to watch the shows that chronicle people flipping houses, or even just fixing them up. We constantly see homes, usually in California, that are "850 square feet, 2 bedrooms, 1 bath in terrible condition, and we bought it for $375,000." WHAT!!!??? $375,000 for that?!

If I had a dollar for every time I've wondered how it's possible for people to afford houses in markets like that, I could retire. On my salary, there's no way I could own a home. Yet, where I live, we have a 3 bedroom, 2 bath home that we're very happy with and can easily afford.

How DOES the "average" person afford a home in those high-priced markets? They can't all be owned by couples who both make six figures.

[Marty McFly]

How DOES the "average" person afford a home in those high-priced markets? They can't all be owned by couples who both make six figures.

The 'average' person is broke and up to their eyeballs in monthly payments. The people flipping houses get the ARM loans because they don't plan on owning the home for more than 6 months... and when they don't sell, they get stuck with the payments they can't afford.

They foreclose.

And the press can't scream loud enough that foreclosures are on the rise!

[Another OMB]

The 'average' person is broke and up to their eyeballs in monthly payments. The people flipping houses get the ARM loans because they don't plan on owning the home for more than 6 months... and when they don't sell, they get stuck with the payments they can't afford.

They foreclose.

And the press can't scream loud enough that foreclosures are on the rise!

But even if you're in debt because of the high payments, you still have to make them, at least at the beginning. I hear about these monthly mortgage payments of $1,500 or $2,000 and there's no way we could do that.

I realize the flippers get ARMs or even interest-only loans. But what about people who are just buying homes, to live there, not flip them? If the husband's a police officer and the wife's a teacher, I'm guessing they can't afford a house. Like I said, all the homeowners can't be making six figures.

[Pro]

Sure you did! You said the people that buy the homes that have been foreclosed on are nothing more than 'bottomfeeders..

Well, they are. But that's besides the point.

When I advocated government intervention in the foreclose mess, it was for the sake of the overall U.S. economy. Not necessairly because the borrowers or even the lenders have been "victims".

[Marty McFly]

Actually, they are 'bottomfeeders' in your elitist opinion.

They also serve as a vital part of the economy you want the government to help.

[Pro]

Actually, they are 'bottomfeeders' in your elitist opinion.

My opinion is only "elitist" in YOUR opinion.

And keeping people in their homes, and having the lenders get more than what the bottomfeeders are paying for these homes would be far more beneificial to the U.S. economy.

[Marty McFly]

My opinion is only "elitist" in YOUR opinion.

And keeping people in their homes, and having the lenders get more than what the bottomfeeders are paying for these homes would be far more beneificial to the U.S. economy.

Hmm... maybe I could pull the Pro card and that your opinion is elitist in mine and others opinion. Kind of like that Supreme Court thing...

[Pro]

Hmm... maybe I could pull the Pro card and that your opinion is elitist in mine and others opinion.

It is a convenient term for people to use to smear those they disagree with...kind of like "smug". That's another favorite smear word from the usual suspects.

[jhans24]

So our ARM adjusted in June and went DOWN to 4 1/4% from 4 3/4. When getting the loan we looked at the fact that it would be year 7 before getting the arm at 1 point lower would start costing us money. With it now going down it will be year 9 before we lose money vs the fixed. Well, now that we've been in the house and done some work on it we figure we will stay in it for a long time. We have been paying at least an extra 100 every month we've been there and can afford it no matter how high the interest rate goes up (within the terms of the loan). Buying that house for 230k when we approved for 500k is really paying off. So is the smart move moving into a fixed rate in the upper fives right now since we will be paying that in two years anyway? When I say it out loud it seems kind of obvious.