[quote=Jazzman]BG, do you think if the tax credits, low interest rates, foreclosure moratoriums, HAMP and other govt. efforts, and the continual prop marketing/lobbying of the RE industry were absent, prices would be where they are now? If you look at S&P’s Case Shiller index over a twenty year period, it’s hard to see how today’s prices are justified in terms of increased incomes. For as long as debt is the cause of price inflation, then it seems doubtful home price appreciation is creating wealth. If a martian was watching, it/he/she would be saying their (humans) problem was debt related, and they are trying to solve it with more debt. I wouldn’t blame them for invading us.[/quote]
If none of the RE propping-up mechanisms were ever employed by the gov’t, I believe 80% of the local market would have certainly crashed 50%+ in early 2008 and all the cash-rich flippers and speculators looking for rentals would have bought trustees deeds and REO’s in full force and leased or resold them all a few months later.
If all the these artificial props were taken away today, there would be no doubt be *countless* former and soon-to-be former long-term squatting homedebtors looking for rentals with a tarnished credit record under their belts. Those for whom chronic unemployment was the primary cause of their default would leave the area for cheaper rental pastures elsewhere. Again, the flipping teams and investor speculators would come out of the woodwork with cash to gobble up the tattered remains of the homedebtors.
Yes, I think many areas could tank, even a lot, but this sold-price-tanking would be temporary …. lasting only until 6 months after the last area homedebtor was evicted from their now-foreclosed upon property.
SD County is not only flush with foreign buyers looking for unique properties and great investment deals, it is flush with dozens of very well-organized REITs, flipping teams and investors of all types (mostly boomers over age 59.5 who have access to a lot of cash and are looking for income). You might be *shocked* as to how handy some of these individual investors are.
The blood in the streets caused from taking away the props (abruptly ending “lender-malaise”) will blow over within 6-12 months, depending on micro area. Then prices will firm up causing more “fence-sitting” sellers to list the better-maintained properties for sale. The eventual sale of these better-maintained properties will enhance the sold comps of their micro area, lifting all surrounding boats. This will happen faster in the “coveted” and “hip” areas and also areas very convenient to public transportation (with no transfers) quickly taking passengers to work centers and major shopping and entertainment.
If CA lenders are no longer paid by the PTB to sit on their hands taking 2+ yrs to work out a mod deal with their squatters, then they will follow the non-judicial foreclosure scheme (of 111/141 days) laid out for them by the CA Legislature one day after they receive word that their props are gone. Soon, the 141-day provision in the code will disappear (and/or the reason for it will) and CA lenders will be back to square one (with a 111-day foreclosure timetable + 3 biz days for a filed trustees deed).
As it should be and should have always been. I don’t mind a bit if this happens. If it happens too close to the time I want to “retire” and move away, I’ll just rent my property until a better day. There will always be a “better day” in SD Co. This is partly due to Prop 13 and partly due to its very interesting and unparalleled locale. And this is coming from a self-professed (realistic) “bear.”
In addition, a very LARGE portion of SD Co’s population is self-employed, retired or otherwise independently wealthy and does NOT depend on jobs to support themselves.
Higher mortgage interest rates would only affect those areas where the majority of buyers customarily take out large mortgages (>417K). In these areas, sold prices would likely be affected by the prevailing interest rate but I think the rate would have to be over 7.5% to affect sold prices. In any case, it would only affect the marginal buyers who probably should not have been shopping in those areas to begin with.
I believe in Darwinism, paying your dues and living within your means and that a particular piece of RE is worth exactly what someone will pay for it . . . nothing more, nothing less. The best CA coastal areas were never created to house the masses of wanna-be buyers to begin with, ESP the working-stiff FTB. They will always be available to those that can afford to live there.
