Impact of foreclosure in prices

[kiki]

Its been said many times that in buying and selling RE emotions play a strong roll. People like to hear what is best for them.
In my case, I want to hear more and more that the bubble is popping and prices will do down 50% so I can finally buy.
Unfortunately I moved to SD in Sept04 where prices were ridiculously high. My husband and I were pre-approved for a 600K loan (15% down fixed 30 yrs) but I find it ridiculously to only live to pay for the house.

I want to believe all the reasons why prices will go down: population exodus, reset loan, high inventories and some people need to sell, foreclosure rate high, etc. But as many first time buyers I get impatient as I want to own as relative high income I want to have some tax saving and secure a low interest rate.

Unfortunately it looks that is going to take a while. Foreclosure was one of the big drivers I thought will help get the prices down fast, but I read on another thread that once a house is foreclosed then it may take months before the houses are being placed for sale. :=(

What happens is a person owes $350K and has 0 equity and realizes that he will not be able to make the payments. He finds a buyer for the place for, lets say $300K. What happens if he does not have the 50K to pay to the bank all at once? Does the house have to go thru foreclosure? Of can he sell the house and arrange a payment to the bank for the $50K. I think this is best for both the lender and the buyer : a) the lender won’t have a foreclosure to deal with and can get 100% of the money loan, but will not have the asset as back up and b) buyer will not have his credit affected and may be able to pay interest on 50K. Is something that can be done? Or not? Is this short sale? If this is possible , maybe people on the verge of foreclosure may be motivated to sell soon and prices have to drop earlier :=)

Sorry for my ignorance. I have read about short sale, is what i explained about short sale? or not?

[powayseller]

I don’t know anything about foreclosures, but would like to respond to waiting for a price drop.

Past real estate cycles in SD took 6-8 years to go up and the same time to go down. If you are waiting for the bottom, it will take many years.

The rash of foreclosures will hit in 2007 and 2008, because in 2007 we have $1trillion of ARMs resetting in the US, and presumably most of those borrowers will be forced to sell. That is when prices will really drop.

As Rich once said, RE is a slow moving ship. We have just started turning in the other direction. Once we turn completely, and sentiment is negative, price drops should go much faster. Sentiment is still positive today.

Once prices drop in earnest, you still have to decide whether to catch a falling knife. If the answer is no, you’ll end up waiting 4-6 years for the bottom.

Foreclosures and ARMs will put pressure on this market, but it will happen in 1-2 years, not now. Imagine you are racing a car and you want to go 100 mph from a stop light. How long will it take you to attain maximum speed? 4 seconds? 6 seconds? That’s my point. It cannot be attained in 0 seconds. Everything of maximum speed takes time to accelerate. Think of RE like a slow moving ship or like a car that must accelerate.

The stock market does the same thing. Slow drops. 1/2%. Another day 2%. Before you know it, 5%. As of today, the major indices are negative for the year. This will get a momentum of its own. So will housing.

I would say this is still a seller’s market, because if they price it just 1-5% below market, they can sell. Buyers still want to buy. We’ve got many optimistic buyers out there.

[PD]

I want to buy too. It is hard to wait but necessary. It seems clear we have turned the corner. Some people are already in trouble, forcing a few below comp sales. PS is right, I do not think sentiment has changed that much. It is going to take hearing bad RE stories from your hairdresser, cousin or neighbor down the street before it really sinks in. Plus, I do not think the newspapers are really going to print the unvarnished, ugly truth until it can no longer be sugarcoated. Just about every article has some realtor or seller saying, “It is just a soft spot, we expect things to firm up in a couple of months. Nothing to worry about.”

[LookoutBelow]

KIKI, you have to go inward for the answer. You have to ask yourself: “other than emotional reason’s of materialism, WHY would you want to own anything” ? If it makes sense, I understand, but it DOES NOT make sense currently. Are your decorating tastes so weird that in order to “decorate” your abode you must own it ? If not than why is it so important to you to “own” something ? Can you take it with you when you go ? Will you be paying CASH for it with no mortgage ?

When buying real estate rivals the expense of renting real estate, and your tax situation allows you to take advantage of it, then you should buy. But spending 3 dollars to save one dollar in taxes is sillyness.

Be different than the herd of sheeple, throw away the idea of “owning” today, its a game designed to indebt you, not empower you. Its all f**ked up presently, it will take years to unravel. Rethink your value system and disarm your opponents in this inner struggle your fighting. You are no less of a person if you rent, in fact, it will soon be viewed as a sign of mental prowess, discipline and restraint, all good virtues. Dont fall for that ownership phallacy of being a good or better citizen of the community because you own instead of rent.

If everybody with financial wherewithall decided tomorrow that they “no longer” felt it necessary to own real estate, the prices would tumble and get back to some type of sanity, until then, greed and materialism are the order of the day, thats a ride that you dont want to get on.

Ease your mind, take a break and give yourself credit for being shrewd and displaying restraint, your on the right path, the market will come to you when this storm passes.

[Anonymous]

To answer your question regarding a short sale, you have the right idea. When the bank will accept less than what is owed on the house during a real estate sale, it is considered a short sale. Short sales are subject to lender approval and may have tax consequences for the seller that should be discussed with a qualified tax advisor.

[sdrealtor]

Yet another hijacked thread by PS.

Kiki, carefully observing answered your question correctly. What you describe is indeed a short sale and they are becoming increasing common. The problem with the distress sale/foreclosure market is that most will have little or no equity. The properties will be sold at or slightly below the current market (what ever that is at a given time). Don’t expect huge bargains here. It will take the market as a whole going down to have a real impact.

[lostkitty]

Yet another a$$#@le comment by sdrealtor.

Lookoutbelow – love the “ownership phallacy” term. Intentional misspelling I presume? Funny… and appropriate!

[Bugs]

Neutral corners.

[powayseller]

sdr, No hijacking. I responded to kiki’s basic question, which LookOutBelow also addressed (but you didn’t call him a hijacker). I suggest you lose your obsession for me. It’s getting really annoying.

kiki wrote:
“But as many first time buyers I get impatient as I want to own as relative high income I want to have some tax saving and secure a low interest rate.

Unfortunately it looks that is going to take a while. Foreclosure was one of the big drivers I thought will help get the prices down fast, but I read on another thread that once a house is foreclosed then it may take months before the houses are being placed for sale. :=(”

[kiki]

I guess that you all correc.
->There is no rush to buy
->And forclosure to impact prices are going to take a W..H..I..L..E

********** Off topic *************

To be honest, what i am really debating is whether i should stay in SD or not. My husband and I have no family here. I happen to find a job that i thoughr i like here and my husband followed me in my decision.

But after close two years, we see that yes “weather is nice” but salaries are not high enough to cover for housing and allowing decent living and saving. I have to admit i get jealous, when our friends talk about houses they are buying and we are thinking “why do we stay here”, “why not move to Seattle, Mineappolis, Dallas, where ever” where i) we will not have to pay “Sunshine tax”..i.e.”low salary” and ii)we can own, get tax credit, get low interest rate.

I read on another blogs and i know from friend trying to convince us to move that with our qualifications we can expect at least a 15% raise increase on another state for the same job we do here.

**********************
Back to my question,

All i can say is : “Hello everyone!, my nickname is Kiki and i am a housing-bubble-blog reader addict. heck i am oversees now for work (its 4am – and can’t stop reading about this). Even worse, and my husband warned me, i am starting to participate in the forums!! If this is not going to change in years, should i be torturing myself?

…I guess i am not ready to drop it yet. Looking forward to learning from all of you! Thanks for your reply.

[lostkitty]

Welcome Kiki!

My husband and I left SD a few years ago. We missed the weather at first (I grew up there), but now do not, and enjoy the seasons, the scenery, the excellent schools for our kids, big houses, etc etc etc. We live much better than we could have in SD. No regrets.

[PD]

If I was in your situation, Kiki, I’d try somewhere new. You might find a place you love and be able to afford a much better lifestyle. Although it is a cool city, SD is by no means the be all end all!

[sdrealtor]

The Question from Kiki

Sorry for my ignorance. I have read about short sale, is what i explained about short sale? or not?

The response from PS

I don’t know anything about foreclosures, but would like to respond to waiting for a price drop.

If thats not hijacking a thread into another topic what is?

[sdrealtor]

Yet another mindless post from lostkitty who to my knowledge has posted nothing except “I love you Powayseller”, “Sdrealtor is an@!#$$%” and “I went surfing and got an ear infection in Coronado”

[powayseller]

Let me put it bluntly sdr. You’re arrogant, short on insight, skim threads and insult people.

Your obession with me is annoying. Your preference to insult me instead of debating issues is tiring. You call me a hijacker, and ignore that PD and LookOutBelow also answered kiki’s deeper question, and said nothing about the short sale. Again, you are obesessing with me. Why didn’t you call them hijackers? I think I know why. You don’t operate on logic, but off-the-cuff on raw emotion and rage.

I am so threatening to you, because I represent the collapse of the real estate industry and the prospect of your income loss. My views are scaring the hell out of you.

When you first came to this forum, I congratulated you on your family oriented nature. I was shocked at your raw handling of Boston_OCRenter’s success story. He has not come back. Once I posted Sell Now, you started after me. That post is what got to you, what really threatened you and perhaps others.

Please, let’s agree to leave each other alone. I don’t like you at all, and I will stay far away from you. I appreciate if you could do the same.

[Author]

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