Has the Housing crash arrived?

[Duckinla]

anyone keeping up with the financial news lately? Seems foreclosures have started and sub-prime lenders are leaving the market. This basically means that a good percentage of potential homebuyers can no longer get qualified for loans. Maybe even 50% or more at some price ranges? Is this the beginning of a big drop in home prices?

 

[Gerry]

Quite possibly from what I am hearing.

Those that went with the low adjustable rates to refinance and flip houses and such are taking a big hit. I think you are going to see foreclosures rise sharply in many areas.

Too many people got very overextened in investing in the housing market and now can not make the payment to cover their investment but will also end up losing their own home in the process of using it to secure financing.

I think it is not going to be pretty in some areas where this was the "in thing". I heard of mortgages flipping on the same day with people buying site unseen. I certainly hope they spent that money wisely but I sincerely doubt it.

Nope, its not going to be pretty and many of the major builders that are listed on the stock exchange have forecast a bleak outlook for 2007.

It may indeed become a buyer's market.

 

[Devil Dog]

It's happening here in SoutWestern Az where I live. Folks right across the street suddenly upped and moved out one day. Come to find out they got foreclosed on.

Lot of folkks around here got adjustable rate mortgages on property that they could normally not afford and it's come back to bite them in the fanny.

 

[Raider]

The last article I read on the forclosure situation, was that home prices havent fallen by very much, were looking to buy another home but waiting to see where the market goes, hopefully down.

 

[Duckinla]

It might be quite the perfect storm. Defaults on the supply side and tremendous reduction of qualified buyers on the demand side. This is something that could escalate quickly. Hardest hit would be condominiums and homes in the $200,000-$400,000 range.

I heard someone saying that the government should step in to help out the defaulting homebuyers. So basically I would have to pay my own mortgage plus I would have to pay the mortgage of someone who overbought. Would just make me wish that I had overbought.

 

[Poker]

Is this the beginning of a big drop in home prices?

It's been an issue for a while now in bubble markets where some have overextended themselves while speculating at the top of a cycle. Smart $ is raising cash and waiting it out, dumb $ is all in and overleveraged. Smart $ eats dumb $ for lunch and this will end the same.

There is a definte credit crunch gaining momentum in the US with many hoping the Fed is going to bail them out with rate cuts, but investors that hope instead of plan are simply part of the dumb $.
Lunch anyone

 

[touchring]

The last article I read on the forclosure situation, was that home prices havent fallen by very much, were looking to buy another home but waiting to see where the market goes, hopefully down.

Coming from a place where the housing crashed by 40% twice the past ten year, the time to buy is when prices start to rise! Don't buy when it is falling, don't buy when it is flat - the interest payment and the yearly depreciation will eat into your capital. Buy only when prices start to pickup again. Start looking for a place to buy when big developers/builders start acquiring new land.

 

[Raider]

Coming from a place where the housing crashed by 40% twice the past ten year, the time to buy is when prices start to rise! Don't buy when it is falling, don't buy when it is flat - the interest payment and the yearly depreciation will eat into your capital. Buy only when prices start to pickup again. Start looking for a place to buy when big developers/builders start acquiring new land.

Thanks for the advice touchring, right now the market is flat here in California, you say to buy when developers start buying land, how would I know that?, what source do you recommend reading? Thanks again!

BTW, I've been to Singapore twice, very nice city, love the MRT!

 

[touchring]

Thanks for the advice touchring, right now the market is flat here in California, you say to buy when developers start buying land, how would I know that?, what source do you recommend reading? Thanks again!

BTW, I've been to Singapore twice, very nice city, love the MRT!

I think you need to check on local publications for developers. Developers usually don't like to hold big pieces of land for too long because of interest and taxes, so if they buy, they'll probably be confident of selling.

Yup, the real estate mkt Singapore starting recovering about the time it peaked in the USA.

 

[Duckinla]

you say to buy when developers start buying land, how would I know that?,

There is no land to be bought by developers in many parts of Southern California. Those places will probably not see the same drop in home prices as places where there is still land to be developed. The cost of building a home doesn't change much, it's the cost of the land that makes home prices go up or down.

If home prices start to drop, I would not underestimate how long they can fall or how far they can go. There can be a real domino effect that keeps it going.

 

[Steen]

I would be surprised to see housing prices fall over 15%. There is no doubt foreclosures have been on the rise lately. With many mortgages about to adjust soon to higher payments it looks like defaults will continue to escalate in the near future.

Does anyone have experience with buying in this market? Just how much of a discount can you get if it goes to auction through the court or if the bank sells the property through a short sale?

 

[namestrands]

The Average House Price Across the UK is now $475,000 and no sign of decline.

An Apartment in London will set you back $500,000 at least.

 

[Dale Hubbard]

The Average House Price Across the UK is now $475,000 and no sign of decline.

An Apartment in London will set you back $500,000 at least.

Quite right. The problem is that these ludicrous prices are unsustainable as more and more people become unable to enter the market.

I think it's time for a drop in the UK - there's a lot of second and third mortgages out there where folk have severely over-extended themselves. Repossession rates are currently high and the Building Societies will often sell at well under market just to recoup their funds.

How one can afford to live in the UK these days is simply beyond me.

 

[Gerry]

Does anyone have experience with buying in this market? Just how much of a discount can you get if it goes to auction through the court or if the bank sells the property through a short sale?

Speaking only from the US side of things, I know personally one couple who were very good friends of mine bought a house at a bank auction for perhaps 60% of appraised value. A gem.

Perhaps some factors came into play like rained out and rescheduled conflicted with some other sales and bidders plans.

I think you will see prices in some areas drop by perhaps as much as 15-25%, maybe even more in certain markets. Trends now for developments are one level, nice home about1200-1500-1800 sq. ft. Why? It's called baby boomers and empty nesters. The massive developments with 2 and 3 story 3500 sq ft+ homes are over abundant and overpriced. A few very savvy developers who designed planned communities around the 50+ age group and made the homes livable for the remainder of their adult lives were told they would never make it. Only a few had the vision about 3-4 years ago to take this step.

These are the developers who can not build and sell houses fast enough. Many of the former owners of those massive houses are downsizing and becoming part of a planned community. Those same developers are finding it increasingly difficult to purchase large parcels of land to create new communities.

In some areas of the country, demand will always dictate price. But in some areas that are overbuilt and simply too many empty houses on the market, you will see prices come down drastically over time. I am seeing a little bit of it happening in the area I live in here in NC but not too much at the moment but I think it will come. Too many golf course communities have been built but the market can not sustain this growth. There is absolutely no shortage of homes in the immediate area from the $350K-$500K. Those are the ones that are vacant. There is simply too many to choose from.

The best hedge for my wife and I over the years has been land...undeveloped land. Lake front or river front land. If you build or buy a house to sell, then you have color or finish or this and that for people to look at and it just isn't their style. Land is simply that...a beautiful piece of property. Let them look at the land and envision their dream.

 

[Creature]

How one can afford to live in the UK these days is simply beyond me.

Seems to me that they live on 'interest only' mortgages and downloads of cash increasing the loan on an existing mortgage. A massive time bomb I reckon. The system is screwed, somethings gotta give but it won't be for many years cos most can download cash on existing mortgage or swap from a 'repayment' to an 'interest only' mortgage.

 

[Gerry]

Some other key factors to look for:

Company closure or relocation. I am not going to wish any bad on anyone.

But here is another scenario if you are in the market to buy. Years ago RJReynolds merged with Nabisco and Planters nuts. Well, RJR moved everyone down here from NJ and other parts of the country. A few years later, the merger started branching off and employees of Nabisco and Planters were moved back. Those that were not able to sell their homes had the mortgages carried by RJR and marketed by a prestigious national realtor.

The result was about 90 very nice homes on the market that RJR was footing the bill for. We WERE in the market for another home. We found what we had been looking for. A local historical home (thus the circa1850 moniker) with 6.5 acres of land for less than $140K. All brick home, even the interior walls are all brick with plaster. Total sq. ft about 3100 but we have since torn down and rebuilt the addition onto the back of the house and it is about 3700 sq ft. That was about 11 years ago now. I won't even bore you with the details of what the house alone appraises for now.

So, look at the market and business news. We just got lucky, very lucky as RJR and the realty company was ready to deal on these vacant homes.

 

[jasdon11]

Quite right. The problem is that these ludicrous prices are unsustainable as more and more people become unable to enter the market.

I think it's time for a drop in the UK - there's a lot of second and third mortgages out there where folk have severely over-extended themselves. Repossession rates are currently high and the Building Societies will often sell at well under market just to recoup their funds.

How one can afford to live in the UK these days is simply beyond me.

When you see what you can get in France, particularly SW, it's pretty tempting. Working online, I can live just about anywhere with broadband.

 

[Gerry]

Seems to me that they live on 'interest only' mortgages and downloads of cash increasing the loan on an existing mortgage. A massive time bomb I reckon. The system is screwed, somethings gotta give but it won't be for many years cos most can download cash on existing mortgage or swap from a 'repayment' to an 'interest only' mortgage.

The interest only thing hit here in the states too. That's all well and good but if you just do the interest only payment and nothing above, there is never any equity. It puts you into a place at a much cheaper payment which may be okay if you don't plan on staying anywhere for any length of time. It is almost like paying rent...you really own nothing (if all you pay is the interest and nothing more).

Problem I see here, is most of these are 3, 5, and 7 year terms, most being 5. So you have to refinance in that term and run the risk of rates being higher, therefore higher payments.

 

[Dale Hubbard]

90% of the people I know (I live in the UK) are in the situation described above; i.e. interest only mortgages; massive credit card debt, substantial equity borrowing etc. It IS a time bomb and with a shorter fuse than people expect I think. And you KNOW which way interest rates are going to go!

 

[namestrands]

You say that, but you have to realise that the one commodity that we no longer make is Land.

Its the land that has the value, over and above the house. House prices have remained consistant however the price of land has gone through the roof.

If building society were to sell at a big loss the average house price would drop significantly, however they know that they have 10 People waiting on the doorstep to snap the house up.

I purchased my house 6 years ago, and it cost me around £110,000 (GBP) it is now worth £380,000 (GBP) and has no mortgage (thank you domains)

Its a sellers market.. but I would be crazy to sell and buy a new place in the UK so instead I will mortgage 50% of the House and Buy a Big House in the Subs of Toronto later this year.

Quite right. The problem is that these ludicrous prices are unsustainable as more and more people become unable to enter the market.

I think it's time for a drop in the UK - there's a lot of second and third mortgages out there where folk have severely over-extended themselves. Repossession rates are currently high and the Building Societies will often sell at well under market just to recoup their funds.

How one can afford to live in the UK these days is simply beyond me.