What could be 30% down, other than the most undesireable condos?
I am waiting for 30-50% down on SFHs. Even then, I would only buy if the bottom was hit, not if prices were still trending down. The biggest price drops ought to come in 2007 and 2008, as exotic loans reset and lenders tighten their lending guidelines, making it much harder to satisfy any existing demand.
Assume our sales go down to 20,000/year, which is half of 2005 sales (I think). At today’s rates and lending guidelines, any bozo can get a loan for a $1 mil house, so those 20,000 buyers will get their homes.
Now assume lenders want a 700+ FICO score, proof of income, max 28% of income to PITI, and 10% down. Subprime lenders are out of business and MBS investors got burned on bad loans, so that’s the reason for the higher standards. Now: how will those 20,000 potential buyers qualify for these homes? They won’t, so only 10,000 buyers can qualify, futher depressing demand and prices.
The change in lending standards, which has NOT even started yet, is going to drive prices down with a vengeance, IMO. We haven’t even seen the effect of ARM resets and tighter lending yet, nor the effect of buyer fear.
Anybody who thinks this is a good time to buy because we are back at 2005 or 2004 prices, hasn’t thought through all the factors that are going to bring this a lot lower.
