BusinessWeek: Why housing could fall 25%

[jpinpb]

The real estate cycle is difficult for me to understand. HLS says the psychology of people has a hand in this. If that’s the case, then the lowering of interest rates and raising of jumbo loans and tax rebates should instill confidence in buyers and w/in the next few months, people may go shopping again, would stand to reason.

HLS says, “Anybody who buys a house today is helping to clean up that mess and saving somebody else the trouble.”

Then what’s to stop that from continuing? The next group saves people and on and on.

I’m ok w/prices coming down b/c I would like to buy a house again. I didn’t want to do it w/trick loans, although now I’m kicking myself for not gambling, since it was free money and the gov. is willing to intervene to save people and banks.

It’s frustrating. I’m trying to do the right thing and not go in over my head and think of the future and the rules are being changed and no one is really playing fair.

Why wouldn’t we have another cycle? What are the reasons that wouldn’t happen. I don’t think we are entitled. I work hard to achieve goals.

Why is it ridiculous to think rich businessmen or foreigners are buying places in San Diego? Irvine company has done that w/apartments and our dollar is so weak compared to the Euro, foreigners can very easily buy places here.

Just scared b/c I don’t want a McMansion. I just want a little place I can call my own and it seems to be so out of reach no matter our hard I try.

If the interest rate is lowered and jumbo loan limit increased and government backing Fannie and Freddie Mac, then why say loose lending is no more. Sounds incredible that they would be so foolish to give money away again, but it almost seems like that’s where they’re heading.

I understand cost of living is going up. I already thought that would impact the economy when in the last several years the price per barrel of oil shot from 50 to $100. And yet, the price of homes continued to rise.

[jpinpb]

I would think that the biggest impact on this real estate cycle is employment, at least in So. Cal.

We had Bill Clinton pass the no capital gains tax on $250k for individuals and $500k for couples and rates were decreased. That was the shot in the arm.

Then we had the tech boom and dotcom jobs. When that bubble burst, we had job losses. Manufacturing, outsourcing, tech, telephone sales, etc. etc. We already compete w/those who will work for less from neighboring countries.

Then what really pushed the real estate boom was the free money, I agree. It was the domino effect from that b/c it created jobs overnight: realtors, brokers, loan officers, appraisers and the endless list of construction jobs. All these jobs paid pretty well and that trinkled back into the economy in the retail sector, Home Depot, Lowes, into restaurants. People homes went up in value. The increase was equivalent and correlated to how low the interest rate was, the teaser rate, to be exact.

This false equity was taken out by people and cars were purchased and credit cards were paid off (and run back up again) and trips were taken and trillions were pumped back into the economy.

I understand all this. With the slowing of real estate, the factor that will really hurt the most is the job losses. Service and tourism related jobs don’t pay that well. Good paying jobs require retraining/schooling – time.

The stock market bubble burst quickly. You can sell stocks immediately. Even though some were reluctant and held on until the company went under. Real estate takes time to sell, dragging this out further.

Yet economists are predicting by the end of 2008 the market will stablize. I don’t know what to think anymore or who to believe. My head is spinning.

[jpinpb]

I would think that the biggest impact on this real estate cycle is employment, at least in So. Cal.

We had Bill Clinton pass the no capital gains tax on $250k for individuals and $500k for couples and rates were decreased. That was the shot in the arm.

Then we had the tech boom and dotcom jobs. When that bubble burst, we had job losses. Manufacturing, outsourcing, tech, telephone sales, etc. etc. We already compete w/those who will work for less from neighboring countries.

Then what really pushed the real estate boom was the free money, I agree. It was the domino effect from that b/c it created jobs overnight: realtors, brokers, loan officers, appraisers and the endless list of construction jobs. All these jobs paid pretty well and that trinkled back into the economy in the retail sector, Home Depot, Lowes, into restaurants. People homes went up in value. The increase was equivalent and correlated to how low the interest rate was, the teaser rate, to be exact.

This false equity was taken out by people and cars were purchased and credit cards were paid off (and run back up again) and trips were taken and trillions were pumped back into the economy.

I understand all this. With the slowing of real estate, the factor that will really hurt the most is the job losses. Service and tourism related jobs don’t pay that well. Good paying jobs require retraining/schooling – time.

The stock market bubble burst quickly. You can sell stocks immediately. Even though some were reluctant and held on until the company went under. Real estate takes time to sell, dragging this out further.

Yet economists are predicting by the end of 2008 the market will stablize. I don’t know what to think anymore or who to believe. My head is spinning.

[jpinpb]

I would think that the biggest impact on this real estate cycle is employment, at least in So. Cal.

We had Bill Clinton pass the no capital gains tax on $250k for individuals and $500k for couples and rates were decreased. That was the shot in the arm.

Then we had the tech boom and dotcom jobs. When that bubble burst, we had job losses. Manufacturing, outsourcing, tech, telephone sales, etc. etc. We already compete w/those who will work for less from neighboring countries.

Then what really pushed the real estate boom was the free money, I agree. It was the domino effect from that b/c it created jobs overnight: realtors, brokers, loan officers, appraisers and the endless list of construction jobs. All these jobs paid pretty well and that trinkled back into the economy in the retail sector, Home Depot, Lowes, into restaurants. People homes went up in value. The increase was equivalent and correlated to how low the interest rate was, the teaser rate, to be exact.

This false equity was taken out by people and cars were purchased and credit cards were paid off (and run back up again) and trips were taken and trillions were pumped back into the economy.

I understand all this. With the slowing of real estate, the factor that will really hurt the most is the job losses. Service and tourism related jobs don’t pay that well. Good paying jobs require retraining/schooling – time.

The stock market bubble burst quickly. You can sell stocks immediately. Even though some were reluctant and held on until the company went under. Real estate takes time to sell, dragging this out further.

Yet economists are predicting by the end of 2008 the market will stablize. I don’t know what to think anymore or who to believe. My head is spinning.

[jpinpb]

I would think that the biggest impact on this real estate cycle is employment, at least in So. Cal.

We had Bill Clinton pass the no capital gains tax on $250k for individuals and $500k for couples and rates were decreased. That was the shot in the arm.

Then we had the tech boom and dotcom jobs. When that bubble burst, we had job losses. Manufacturing, outsourcing, tech, telephone sales, etc. etc. We already compete w/those who will work for less from neighboring countries.

Then what really pushed the real estate boom was the free money, I agree. It was the domino effect from that b/c it created jobs overnight: realtors, brokers, loan officers, appraisers and the endless list of construction jobs. All these jobs paid pretty well and that trinkled back into the economy in the retail sector, Home Depot, Lowes, into restaurants. People homes went up in value. The increase was equivalent and correlated to how low the interest rate was, the teaser rate, to be exact.

This false equity was taken out by people and cars were purchased and credit cards were paid off (and run back up again) and trips were taken and trillions were pumped back into the economy.

I understand all this. With the slowing of real estate, the factor that will really hurt the most is the job losses. Service and tourism related jobs don’t pay that well. Good paying jobs require retraining/schooling – time.

The stock market bubble burst quickly. You can sell stocks immediately. Even though some were reluctant and held on until the company went under. Real estate takes time to sell, dragging this out further.

Yet economists are predicting by the end of 2008 the market will stablize. I don’t know what to think anymore or who to believe. My head is spinning.

[jpinpb]

I would think that the biggest impact on this real estate cycle is employment, at least in So. Cal.

We had Bill Clinton pass the no capital gains tax on $250k for individuals and $500k for couples and rates were decreased. That was the shot in the arm.

Then we had the tech boom and dotcom jobs. When that bubble burst, we had job losses. Manufacturing, outsourcing, tech, telephone sales, etc. etc. We already compete w/those who will work for less from neighboring countries.

Then what really pushed the real estate boom was the free money, I agree. It was the domino effect from that b/c it created jobs overnight: realtors, brokers, loan officers, appraisers and the endless list of construction jobs. All these jobs paid pretty well and that trinkled back into the economy in the retail sector, Home Depot, Lowes, into restaurants. People homes went up in value. The increase was equivalent and correlated to how low the interest rate was, the teaser rate, to be exact.

This false equity was taken out by people and cars were purchased and credit cards were paid off (and run back up again) and trips were taken and trillions were pumped back into the economy.

I understand all this. With the slowing of real estate, the factor that will really hurt the most is the job losses. Service and tourism related jobs don’t pay that well. Good paying jobs require retraining/schooling – time.

The stock market bubble burst quickly. You can sell stocks immediately. Even though some were reluctant and held on until the company went under. Real estate takes time to sell, dragging this out further.

Yet economists are predicting by the end of 2008 the market will stablize. I don’t know what to think anymore or who to believe. My head is spinning.

[jpinpb]

I’ve actually seen some places go back on the market w/a price increase. This is incomprehensible to me. It’s defying all logic. I’m so confused.

[jpinpb]

I’ve actually seen some places go back on the market w/a price increase. This is incomprehensible to me. It’s defying all logic. I’m so confused.

[jpinpb]

I’ve actually seen some places go back on the market w/a price increase. This is incomprehensible to me. It’s defying all logic. I’m so confused.

[jpinpb]

I’ve actually seen some places go back on the market w/a price increase. This is incomprehensible to me. It’s defying all logic. I’m so confused.

[jpinpb]

I’ve actually seen some places go back on the market w/a price increase. This is incomprehensible to me. It’s defying all logic. I’m so confused.

[HLS]

JP,
Affordability is needed to bring the reality back.

You need to understand markets and bubbles, regardless of the product involved. The bubble bursts, and people are in denial all the way down, basing their perception on the peak prices.

Houses were never really worth what they were selling for.
It was greed that kept many people from selling in 2004-05, they wanted more.

It was 100% financing that fueled the mania, nothing more.

There are over 18,500 properties for sale in SD county this week, and over 50,000 in Riverside.

In December, about 1500 sold, about 8% of what is listed for sale in SD. There are thousands of other houses that people would gladly sell today, if only they could get the unrealistic price that they have in their mind.

It looks like January sales are 50% REO/lender owned, meaning that the public is being totally unrealistic about their asking prices.

As of today, most people are completely in fantasyland about the real value of their house today. If they HAD to sell it, it’s probably worth 25%-30% than they think, and will probably be worth less next year.

Nobody HAS TO buy a house, people want to buy.
Some people HAVE TO sell a house, and can only get what it is worth in today’s market.

I’m in the mortgage business. I see the real messes that some people are in. I hear the horror stories.

Many people who want to buy today simply do not qualify.

If conforming loan limits do get raised, everybody already assumes that pricing will be the same as today’s conforming amount. I don’t know if that is true.

For people who do qualify, they may just get cheaper loans. People who don’t qualify, still won’t qualify for a $600K loan.

The govt is willing to try ANYTHING to keep the house of cards from collapsing. Their concern is the economy, not the homeowner.

When a lender says that they want to help the “homeowner” stay in their house, it’s a lie. They really want to keep from having another foreclosure that they will lose money on.

If they were truly trying to help the public, they would make people realize that the best thing for many people is to walk away, after 6 mos + of no payments, and saving up some money.

Instead of being in debt for $600K on a home worth $450K today, they can go rent for much less than their ownership payment, and probably buy a similar property back in several years for $300K.

That won’t be good for the economy.

[HLS]

JP,
Affordability is needed to bring the reality back.

You need to understand markets and bubbles, regardless of the product involved. The bubble bursts, and people are in denial all the way down, basing their perception on the peak prices.

Houses were never really worth what they were selling for.
It was greed that kept many people from selling in 2004-05, they wanted more.

It was 100% financing that fueled the mania, nothing more.

There are over 18,500 properties for sale in SD county this week, and over 50,000 in Riverside.

In December, about 1500 sold, about 8% of what is listed for sale in SD. There are thousands of other houses that people would gladly sell today, if only they could get the unrealistic price that they have in their mind.

It looks like January sales are 50% REO/lender owned, meaning that the public is being totally unrealistic about their asking prices.

As of today, most people are completely in fantasyland about the real value of their house today. If they HAD to sell it, it’s probably worth 25%-30% than they think, and will probably be worth less next year.

Nobody HAS TO buy a house, people want to buy.
Some people HAVE TO sell a house, and can only get what it is worth in today’s market.

I’m in the mortgage business. I see the real messes that some people are in. I hear the horror stories.

Many people who want to buy today simply do not qualify.

If conforming loan limits do get raised, everybody already assumes that pricing will be the same as today’s conforming amount. I don’t know if that is true.

For people who do qualify, they may just get cheaper loans. People who don’t qualify, still won’t qualify for a $600K loan.

The govt is willing to try ANYTHING to keep the house of cards from collapsing. Their concern is the economy, not the homeowner.

When a lender says that they want to help the “homeowner” stay in their house, it’s a lie. They really want to keep from having another foreclosure that they will lose money on.

If they were truly trying to help the public, they would make people realize that the best thing for many people is to walk away, after 6 mos + of no payments, and saving up some money.

Instead of being in debt for $600K on a home worth $450K today, they can go rent for much less than their ownership payment, and probably buy a similar property back in several years for $300K.

That won’t be good for the economy.

[HLS]

JP,
Affordability is needed to bring the reality back.

You need to understand markets and bubbles, regardless of the product involved. The bubble bursts, and people are in denial all the way down, basing their perception on the peak prices.

Houses were never really worth what they were selling for.
It was greed that kept many people from selling in 2004-05, they wanted more.

It was 100% financing that fueled the mania, nothing more.

There are over 18,500 properties for sale in SD county this week, and over 50,000 in Riverside.

In December, about 1500 sold, about 8% of what is listed for sale in SD. There are thousands of other houses that people would gladly sell today, if only they could get the unrealistic price that they have in their mind.

It looks like January sales are 50% REO/lender owned, meaning that the public is being totally unrealistic about their asking prices.

As of today, most people are completely in fantasyland about the real value of their house today. If they HAD to sell it, it’s probably worth 25%-30% than they think, and will probably be worth less next year.

Nobody HAS TO buy a house, people want to buy.
Some people HAVE TO sell a house, and can only get what it is worth in today’s market.

I’m in the mortgage business. I see the real messes that some people are in. I hear the horror stories.

Many people who want to buy today simply do not qualify.

If conforming loan limits do get raised, everybody already assumes that pricing will be the same as today’s conforming amount. I don’t know if that is true.

For people who do qualify, they may just get cheaper loans. People who don’t qualify, still won’t qualify for a $600K loan.

The govt is willing to try ANYTHING to keep the house of cards from collapsing. Their concern is the economy, not the homeowner.

When a lender says that they want to help the “homeowner” stay in their house, it’s a lie. They really want to keep from having another foreclosure that they will lose money on.

If they were truly trying to help the public, they would make people realize that the best thing for many people is to walk away, after 6 mos + of no payments, and saving up some money.

Instead of being in debt for $600K on a home worth $450K today, they can go rent for much less than their ownership payment, and probably buy a similar property back in several years for $300K.

That won’t be good for the economy.

[HLS]

JP,
Affordability is needed to bring the reality back.

You need to understand markets and bubbles, regardless of the product involved. The bubble bursts, and people are in denial all the way down, basing their perception on the peak prices.

Houses were never really worth what they were selling for.
It was greed that kept many people from selling in 2004-05, they wanted more.

It was 100% financing that fueled the mania, nothing more.

There are over 18,500 properties for sale in SD county this week, and over 50,000 in Riverside.

In December, about 1500 sold, about 8% of what is listed for sale in SD. There are thousands of other houses that people would gladly sell today, if only they could get the unrealistic price that they have in their mind.

It looks like January sales are 50% REO/lender owned, meaning that the public is being totally unrealistic about their asking prices.

As of today, most people are completely in fantasyland about the real value of their house today. If they HAD to sell it, it’s probably worth 25%-30% than they think, and will probably be worth less next year.

Nobody HAS TO buy a house, people want to buy.
Some people HAVE TO sell a house, and can only get what it is worth in today’s market.

I’m in the mortgage business. I see the real messes that some people are in. I hear the horror stories.

Many people who want to buy today simply do not qualify.

If conforming loan limits do get raised, everybody already assumes that pricing will be the same as today’s conforming amount. I don’t know if that is true.

For people who do qualify, they may just get cheaper loans. People who don’t qualify, still won’t qualify for a $600K loan.

The govt is willing to try ANYTHING to keep the house of cards from collapsing. Their concern is the economy, not the homeowner.

When a lender says that they want to help the “homeowner” stay in their house, it’s a lie. They really want to keep from having another foreclosure that they will lose money on.

If they were truly trying to help the public, they would make people realize that the best thing for many people is to walk away, after 6 mos + of no payments, and saving up some money.

Instead of being in debt for $600K on a home worth $450K today, they can go rent for much less than their ownership payment, and probably buy a similar property back in several years for $300K.

That won’t be good for the economy.

[Author]

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