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  • February 23, 2012 at 2:01 PM #19538
    admin
    Keymaster

    I’ve theorized, I believe correctly, that:

    1. Homeowners at the high-end have more wherewithal. That means that they would hang on to their houses as long as they expect an upswing in house prices that would make them whole.

    2. Since a recovery to the peak prices is nowhere in sight, people are making the choices to walk away and cut their losses. They are no longer thinking about being made whole.

    Of course, timing is everything and whether homeowners walk depends on when they bought their houses.

    I continue to believe that peak purchases will turnover as homeowners give up, before this real estate malaise is over.

    http://money.cnn.com/2012/02/23/real_estate/million_dollar_foreclosures/index.htm?iid=HP_LN
    Out of all foreclosure activity, the share of foreclosures on properties valued at $1 million or more has risen by 115% since 2007 while the share of multi-million dollar foreclosures — or homes valued at more than $2 million — jumped by 273%. Meanwhile, the share of foreclosures on mid-range properties valued between $500,000 and $1 million fell by 21%.

    February 23, 2012 at 2:24 PM #738555
    sdduuuude
    Participant

    I think the redfin sold vs. asking price per sq. ft for 92130 agrees with you.

    February 23, 2012 at 3:25 PM #738557
    The-Shoveler
    Participant

    A few thoughts on this,
    1) If it’s someplace like CV (close to where they need to be) I would think people will be less inclined to walk because they need to live somewhere anyway and if they can afford it why move ? (unless forced of course or they just want to buy an even better place, I have heard of it happening, its not that rare for a short sale after the owner buys another even more upscale home).
    2) I think Banks are more willing to talk to you if you owe 1 Million or more. (I heard a Joke once, When I owed 100K no one would talk to me, but now that I owe 5 million they call me !!).
    3) There are fewer people who can afford the high end even after the decline, so yea there may be some deals out there.

    One more
    4) Even though the percentage has gone up, the absolute number is still probably fairly small.

    February 23, 2012 at 4:13 PM #738559
    briansd1
    Guest

    I believe there’s a lot of psychology at work. It’s the prospect theory and the loss aversion theory at play at the same time.

    I hear more people talking about walking as an option.

    IMHO, people who put down 20% won’t walk, but those who don’t have much downpayment will walk when it dawns on them prices aren’t coming back to peak.

    A friend’s parents in New Jersey bought a house the peak. To them, it will always be worth what they paid or more. I believe they are slowly coming to the realization that either they swallow the loss, or die waiting for prices to come back.

    February 23, 2012 at 4:40 PM #738561
    The-Shoveler
    Participant

    Me I kind of look at like the “nasdaq”
    Will I ever see it at 5000 again in my life time ?
    Is there something more important I need my money for right now ?
    Will the dang bank give me a new loan ?

    February 23, 2012 at 4:46 PM #738562
    permabear
    Participant

    [quote=briansd1]I hear more people talking about walking as an option.[/quote]

    At my office, definitely. One guy was dead-set against it, but now he wants to get married, and she doesn’t want the debt, so they’re planning a he-defaults, she-buys pre-marriage deal.

    IMO, as the high-end continues to show softness, that’ll pressure the mid-range to some worthwhile deals. Right now, office chatter and anecdotes still don’t line up with all the inflation-adjusted graphs Rick keeps posting. I don’t hear talk of “getting ready to buy” but instead “still can’t afford it”.

    February 23, 2012 at 4:47 PM #738563
    permabear
    Participant

    duplicate

    February 23, 2012 at 5:53 PM #738566
    sdrealtor
    Participant

    I’ve handled two of the “she defaults” sides of those things. They are defintely out there

    February 23, 2012 at 6:12 PM #738567
    The-Shoveler
    Participant

    I don’t quite buy the High end pressuring the middle end of the market. Unless it’s some sort of move-up buy and bail (there are even short sales specialist advertising for helping you do that, although they don’t call it buy and bail but that’s what it is).
    I don’t think there are too many peak buyers left in the middle or low end anyway, but I could be wrong.
    High end I can see there being a larger percentage left as it probably is not as significant a part of the total to a lot of these guys.
    Yea they have that much.

    February 23, 2012 at 7:06 PM #738569
    briansd1
    Guest

    [quote=Nor-LA-SD-GUY2]I don’t quite buy the High end pressuring the middle end of the market.
    [/quote]

    I would agree that the high-end is a segment apart.

    [quote=Nor-LA-SD-GUY2]
    I don’t think there are too many peak buyers left in the middle or low end anyway, but I could be wrong.
    [/quote]
    I still think that there are plenty, but record low rates have helped people stay in their homes. Remember that they can’t refinance because of lack of equity.

    This segment depends on interest rates most.
    If rates shoot up as deficit hawks believe they will, then carrying costs would go up too, discouraging new buyers and hurting people with adjustable mortgages.

    [quote=Nor-LA-SD-GUY2]
    High end I can see there being a larger percentage left as it probably is not as significant a part of the total to a lot of these guys.
    [/quote]

    I believe that there was a lot of “investment” and speculation at the high end.
    Once people accept that their investments are going nowhere, they will walk. To psychologically break even, prices have to return to peak. To truly break even, prices need to be peak+++ to compensate for years of carrying costs.

    February 23, 2012 at 7:28 PM #738571
    SD Realtor
    Participant

    You seem to be conveniently discounting all of the programs that are gaining alot more traction that are intended to keep people in homes.

    I don’t disagree with the walk away events happening however I think the effect will not be substantial and it has already been displayed that the govt is more then prepared to deal with the problem. I don’t believe that midlevel 700k homes in 4S or CV will be affected by 1 or 2 million dollar walkaways.

    I have been saying over and over that once rates start moving up rapidly we will then see depreciation. I think it will be across the board for the most part as well. Finally the refinance craze has for the most part gobbled up all of the adjustables you are referring to. The programs now in place will for the most part eat up the remainders as there are no more appraisals needed and even underwater homeowners can refi.

    February 23, 2012 at 8:14 PM #738573
    sdduuuude
    Participant

    I see it this way. I just think there is some natural turnover in any part of town. From Carmel Valley, I think empty-nesters and divorcees are those who find it is time to sell and go somewhere else. They aren’t distressed sales, but just time to sell. So, I think they have been waiting for the market to turn up but it isn’t really going anywhere.

    It is bouncing around in a fixed range and will be for some time. I think brian said it best – they are losing patience. These sellers are ready to take an offer at the current market value to get to where they want to go next. Plus, they have had some time to get used to the idea of taking a hit and realith may sink in a bit. Maybe they have even saved up some cash so the pain of a short sale or loss isn’t as acute. Maybe they take the pain to find a better place.

    This scenario doesn’t mean plummetting prices, but it means a little downward pressure.

    February 23, 2012 at 8:15 PM #738575
    briansd1
    Guest

    [quote=SD Realtor]You seem to be conveniently discounting all of the programs that are gaining alot more traction that are intended to keep people in homes.
    [/quote]

    If you are talking about the latest settlement with attorneys general, I don’t believe this $26 billion settlement will have much effect.

    IMHO, the $26 billion represent losses or accomodations the bank would have incurred anyway, so the banks will simply count those deals as participating in the settlement.

    [quote=SD Realtor]
    I don’t disagree with the walk away events happening however I think the effect will not be substantial and it has already been displayed that the govt is more then prepared to deal with the problem.
    [/quote]

    I agree that the effect will not be substantial to the market as a whole. The market has stabilized and will be boucing along the bottom for a while.

    [quote=SD Realtor]
    I don’t believe that midlevel 700k homes in 4S or CV will be affected by 1 or 2 million dollar walkaways.
    [/quote]

    I also agree. They are two separate segments.

    But if a buyer is looking for a house above $1 million, or even better above $2 million, he will have some good choices.

    [quote=SD Realtor]
    I have been saying over and over that once rates start moving up rapidly we will then see depreciation. I think it will be across the board for the most part as well.
    [/quote]

    Again I agree. At this point, however, I’m not sure what might cause interest rates to increase.

    February 23, 2012 at 8:17 PM #738576
    briansd1
    Guest

    [quote=sdduuuude]This scenario doesn’t mean plummetting prices, but it means a little downward pressure.[/quote]

    Yes… a little downward pressure and more choices as sellers reluctantly put houses on the market.

    February 23, 2012 at 8:55 PM #738580
    SD Realtor
    Participant

    I gave up trying to predict interest rates. We are inflating but so far it is hidden in basic necessities like food, utilities, etc… For sure nothing happens until after the election. At some point it will happen… could be a year could be 10 years down the road. I just don’t think that anything will happen organically though.

    Also all of the programs I am referring to have to do with loan mods, principal reductions, etc… they have nothing to do with the attorneys general.

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