Its called the river of Denial

That these greedy sellers will not lower the prices on the overpriced shacks.

MMW,
Loans are NOT impossible to find/fund. Your source is flawed. What IS impossible, is getting the truth about what is really going on.

Lending standards are just returning to the good old days. They are NOT getting stricter every week, and you don’t need “pristine” credit to get a loan.

There is still TONS of money available to borrow IF YOU QUALIFY.

I’m as big a bear as anybody, but the media reports flippant comments like you are stating.
There was an idiotic article the other day that states that prices are holding because the MEDIAN is about the same. Repeated by people who don’t understand what they are saying.

MOST people do not have a mortgage problem. My guess is that at least 90%-95% of San Diego county bought their homes prior to 2005. IF they didn’t use their home like an ATM machine, many have a tiny to huge amount of equity and a fixed rate loan, or no loan at all.

Many older solid neighborhoods may not fall very much.

For every person that bought at/near the top, there was a seller, many of whom made a pile of cash and timed the market perfectly, and are sitting on the sidelines. Ex-SD (On this borad) for one, was a genius, and moved to South Carolina with his stash of cash.

There are plenty of people that have a huge net worth. Many truly wealthy “old money” people live modestly
and there are a fair amount of younger professionals who make 6 figure incomes, with H&W making well over $200K a year. They may well have $200k for a down payment on a $1M house, and can afford an $800K mortgage.

Only an intelligent CHARGER player would be looking at a $1M home today. Others want McMansions. There are plenty of $3M+ homes around too.

The highest end of the market isn’t as soft as many people think. Many with $3M+ homes aren’t hurting or desperate and large estates or spectacular views are what’s most attractive to wealthy foreigners. The weak dollar represents a bargain to some. A $3M home was 3 million Euros, and today is now only 2.2 million Euros.

I’m in the lending biz. Jumbo rates are closer to 7% or under.

MEDIAN is a meaningless statistic.
Which part of my rant do you think is wrong ?

Many of these people have been living here for a very long time. LOTS of retired military, etc. Many bought $30K homes MANY years ago that are $700K today, they even bought a rental or two that they still have.

Homes that were $90K 20 years ago became about $500K at the peak. It wasn’t that long ago, but still sheer insanity.

Dealing with the median, $20K, $50K, $200K, $1M, $2M
The median is $200K… To the other 4 people the median means absolutely nothing to their personal situation.

I’m yet to figure out WHY the median is used, other than to mislead.

I don’t expect a soft landing.

Just a long drawn out process of builders continuing to lower prices until they can walk away from a completed project (with a sigh of relief)
coupled with…….
The denial of resellers as to what todays realistic price is and asking more for a used house than a new one.

Once that fight is over, the next wave will be flat prices with few buyers to step in due to affordability.

While this is playing out over the next few years, the “must sells” and REO’s and foreclosures will continue, establishing values in each area based on supply and demand.

It still wont affect the owner occupied property in an old established neighborhood who will be a few years closer to being fully paid off. It’s remains the majority of homeowners.

NAR spokespiece said that mid-late 2008 will be the bottom. Can you imagine ? I’m not sure that 2010 will be the bottom.

We’re on the same page, however I don’t think that a very high % have used their home like an ATM to that extent.
I do expect general prices to continue declining, although not every neighborhood/area.

What do you mean by “lots” of BK’s ?

There is no doubt that many did refi and take cash out, but those that refi’d to 100% in 2005 are few.

If someone paid $40K years ago and refi’d to $300K in 2002 they still have equity and (hopefully) an affordable payment. If they only took out $50k-$100K, it’s no big deal.

With the current subprime borrower crisis, about 85%-90% of borrowers ARE paying their mortgages on time, even with an increase. In excess of 95% of Prime borrowers are paying.

The defaults will be a tiny % of the overall market, but will still have impact.

Realize that the crazy exotic loans did allow many people to buy (who would not have otherwise qualified) after 2001 and they now have equity and an affordable payment, and they are not defaulting.

In San Diego county, I think that it would be a HUGE stretch to say that 10% of homes are leveraged over 90% even at todays price.
I don’t know how many homes there are in the county.

I’d say that 90% of homeowners in SD county today could not afford to buy the home that they own today. There is something wrong with that.

The real problem is about 24-30 months of purchase window AND those who refi’d with large cash out.

I really do understand your point. (Some people who took money out improved their properties)
I just think that the number of real problems is low as an overall %.
No doubt there were a few that took out $500K and just blew it, but how many ??
Sure there will be some BK’s, but not a high %.

Some people expect a complete collapse, rolling back prices to 2001 levels. I don’t think it will happen.
Too many people have equity and only need to afford the difference of moving up or they just aren’t going anywhere.

Back to the OP question, there are people that have old houses owned free and clear, that they can sell for $700K+ and they can move to a brand new $1M tract house with a mortgage of less than the conforming $417K amount.
Although the market is weak and will correct, it’s not going to collapse.

Riverside county is a different scenario. A higher % there will be losing their homes due to affordability.

HLS, your guess is as good as mine, but I think that as general prices go down over the next 2 years, buyers who bought at lower prices will start to face difficulties, triggering more price decline pressures. As esmith said, this thing feeds on itself, so it’s very hard to say that 2003 prices or 2001 or even 1998 form the bright line at which prices will stop declining.

For example, short of government intervention in the form of inflation or bail-outs, where will the rational lenders come from who give 90% of a home’s purchase price in an environment where prices are declining by 10% annually with no upturn in sight? You’d have to be desperate or stupid to be the ultimate investor making such a loan to anyone in a state with no-recourse purchase money loans.

Eventually, prices will go up. Why? Becuase they always do. But I think it’s too early to accurately predict the bottom for this downturn.

Patient renter in OC

HLS and esmith – very good points