Shadow inventory finally being released ?

[Scarlett]

[quote=CA renter][As for those ARM mortgages, they were being pushed heavily during the bubble because of the historically low interest rates. If rates are low in the current period, they are more likely to go higher in the future. Lenders were using ARM products to shift this (rising) interest rate risk onto borrowers when rates were low. If rates are high (and lenders think rates are near the top), they will be more likely to want to lock-in those rates via fixed-rate product.

IMHO, while ARM loans will be available, in order to account for the rising rates, lenders will probably have higher starting rates, and/or raise caps on the increases over the life of the loan. They will want borrowers to qualify at the highest possible rate, because lenders will understand the risk of collateral price depreciation. This will affect what the buyers/borrowers can afford. Lenders might also increase down payment requirements for these loans to protect against the risk of depreciating collateral in a rising rate environment.

IOW, I’m not so sure that ARM products will give borrowers much more purchasing power if we begin to see rates rising rapidly.

Just a guess, but if I were a lender, that’s what I’d be doing.[/quote]

Yea, but unfortunately, the lenders are not like you. 🙂

I might be wrong, and SD R or sdr can tell, but when the rates were high for the 30 yr FRM, more people bought with ARMs – i.e. fixed rate for 5,7 yrs or 10 yrs, then adjustable rate. Many people sell within 7 years (on average), or at least used to. A 8% FRM is high, but it could go higher still (15% 30 yr FRM for example) so there is still risk of that.

I agree that, compared to the bubble time, the criteria WILL be more stringent for the ARMs, like better DTI ratio, higher down (but still no more than 20%), higher credit scores etc.

So when the rates for the 30 yr FRM will rise to 8%, a higher percentage of well qualified buyers will go for the ARMs instead, especially if they think they would either sell in 10 years, or re-fi to a lower rate in that interval. The monthly payment until then will be lower with those ARMs, so it will keep the buying power relatively the same.

[Scarlett]

[quote=CA renter]2. If prices drop with rising interest rates, there will be less money from sales of starter homes (already happening, as starter neighborhoods were already decimated by late 2008). So, less money from the move-up market.
[/quote]

That is what IMHO will greatly contribute to the further, significant fall of the housing prices – the decrease of number of qualified first time buyers (with large downpayments) and move-up buyers with rising rates. It will take a while though.

To get more move-up buyers the prices would have stay high and/or rates low. The people that cannot move-up won’t sell, so there will be lower inventory from them (of course, some HAVE to sell). There is also the increased number of people that have owned for a long time and/or downsize/retire who can afford to sell.

To get more first time buyers – prices would have to go down more (most likely driven by higher rates), or rates go down even further… )(or, better paying jobs, more jobs, sure!).

One compromise option is to keep the rates relatively low for a very long time (if they can)…a (lost) decade or so.

[Scarlett]

[quote=CA renter]2. If prices drop with rising interest rates, there will be less money from sales of starter homes (already happening, as starter neighborhoods were already decimated by late 2008). So, less money from the move-up market.
[/quote]

That is what IMHO will greatly contribute to the further, significant fall of the housing prices – the decrease of number of qualified first time buyers (with large downpayments) and move-up buyers with rising rates. It will take a while though.

To get more move-up buyers the prices would have stay high and/or rates low. The people that cannot move-up won’t sell, so there will be lower inventory from them (of course, some HAVE to sell). There is also the increased number of people that have owned for a long time and/or downsize/retire who can afford to sell.

To get more first time buyers – prices would have to go down more (most likely driven by higher rates), or rates go down even further… )(or, better paying jobs, more jobs, sure!).

One compromise option is to keep the rates relatively low for a very long time (if they can)…a (lost) decade or so.

[Scarlett]

[quote=CA renter]2. If prices drop with rising interest rates, there will be less money from sales of starter homes (already happening, as starter neighborhoods were already decimated by late 2008). So, less money from the move-up market.
[/quote]

That is what IMHO will greatly contribute to the further, significant fall of the housing prices – the decrease of number of qualified first time buyers (with large downpayments) and move-up buyers with rising rates. It will take a while though.

To get more move-up buyers the prices would have stay high and/or rates low. The people that cannot move-up won’t sell, so there will be lower inventory from them (of course, some HAVE to sell). There is also the increased number of people that have owned for a long time and/or downsize/retire who can afford to sell.

To get more first time buyers – prices would have to go down more (most likely driven by higher rates), or rates go down even further… )(or, better paying jobs, more jobs, sure!).

One compromise option is to keep the rates relatively low for a very long time (if they can)…a (lost) decade or so.

[Scarlett]

[quote=CA renter]2. If prices drop with rising interest rates, there will be less money from sales of starter homes (already happening, as starter neighborhoods were already decimated by late 2008). So, less money from the move-up market.
[/quote]

That is what IMHO will greatly contribute to the further, significant fall of the housing prices – the decrease of number of qualified first time buyers (with large downpayments) and move-up buyers with rising rates. It will take a while though.

To get more move-up buyers the prices would have stay high and/or rates low. The people that cannot move-up won’t sell, so there will be lower inventory from them (of course, some HAVE to sell). There is also the increased number of people that have owned for a long time and/or downsize/retire who can afford to sell.

To get more first time buyers – prices would have to go down more (most likely driven by higher rates), or rates go down even further… )(or, better paying jobs, more jobs, sure!).

One compromise option is to keep the rates relatively low for a very long time (if they can)…a (lost) decade or so.

[Scarlett]

[quote=CA renter]2. If prices drop with rising interest rates, there will be less money from sales of starter homes (already happening, as starter neighborhoods were already decimated by late 2008). So, less money from the move-up market.
[/quote]

That is what IMHO will greatly contribute to the further, significant fall of the housing prices – the decrease of number of qualified first time buyers (with large downpayments) and move-up buyers with rising rates. It will take a while though.

To get more move-up buyers the prices would have stay high and/or rates low. The people that cannot move-up won’t sell, so there will be lower inventory from them (of course, some HAVE to sell). There is also the increased number of people that have owned for a long time and/or downsize/retire who can afford to sell.

To get more first time buyers – prices would have to go down more (most likely driven by higher rates), or rates go down even further… )(or, better paying jobs, more jobs, sure!).

One compromise option is to keep the rates relatively low for a very long time (if they can)…a (lost) decade or so.

[bearishgurl]

The way I see it, Scarlett, you can’t speculate across the board what will happen with interest rates as a whole in order to make an educated buying decision. They will fluctuate throughout your lifetime and in ALL times good opportunities exist to buy and sell RE. All you can do here is study your OWN market of interest to make an average determination of (1) WHO are the typical homeowners in your own market of interest? (2) HOW do these homeowners make their living? (3) What is the average length of time of homeownership there? (4) Why do these particular types of homeowners own in this particular area? (5) What is the ratio of homeowners to renters there? (6) What is the ratio of dual-income (or more) households to one-income households there? (7) What are the carrying costs for a homeowner in this area and what services do they include? Would I use all those services? (8) What would my daily life be like if I lived in that area (commute, etc)? (9) What could I likely get for rent on a consistent basis in any market if I had to move away for job or family reasons? (10) What is the current percentage of distressed properties in this area (“short-sales,” filed NOD’s and NOS’s, REO’s)?

If your window of ownership is intended to be long-term, ask yourself if the property would still serve your needs if you were at a different “station in life” than you currently are. If you are short on downpayment funds, ask yourself if the typical seller in this area has the ability and willingness to assist you (i.e, OCB, 2nd TD, straight note or balloon payment for 5-10 years).

IMO, a lot of distress in an area does not bode well for the stability of the typical homeowner there. Also, in tracts (NOT typically custom areas, which are a different animal) where dual income households prevail and also a predominance of households consisting of cultures where it is commonplace to have 3+ monthly incomes coming in will tend to be more stable (read: generally less distress) than areas where there are mostly single-income households, IMHO.

Even if you should purchase a “short-sale” or REO yourself, it may not end up being a “good investment” if there are many more “short-sales” or REO’s still “in the pipe” in that area.

IMO, you should really just focus on your micro-areas and again, in this economy, the most important questions to ask yourself are, WHO are these homeowners, HOW do they make their livings, and HOW long have they owned there? IOW, is the area stable :=]

[bearishgurl]

The way I see it, Scarlett, you can’t speculate across the board what will happen with interest rates as a whole in order to make an educated buying decision. They will fluctuate throughout your lifetime and in ALL times good opportunities exist to buy and sell RE. All you can do here is study your OWN market of interest to make an average determination of (1) WHO are the typical homeowners in your own market of interest? (2) HOW do these homeowners make their living? (3) What is the average length of time of homeownership there? (4) Why do these particular types of homeowners own in this particular area? (5) What is the ratio of homeowners to renters there? (6) What is the ratio of dual-income (or more) households to one-income households there? (7) What are the carrying costs for a homeowner in this area and what services do they include? Would I use all those services? (8) What would my daily life be like if I lived in that area (commute, etc)? (9) What could I likely get for rent on a consistent basis in any market if I had to move away for job or family reasons? (10) What is the current percentage of distressed properties in this area (“short-sales,” filed NOD’s and NOS’s, REO’s)?

If your window of ownership is intended to be long-term, ask yourself if the property would still serve your needs if you were at a different “station in life” than you currently are. If you are short on downpayment funds, ask yourself if the typical seller in this area has the ability and willingness to assist you (i.e, OCB, 2nd TD, straight note or balloon payment for 5-10 years).

IMO, a lot of distress in an area does not bode well for the stability of the typical homeowner there. Also, in tracts (NOT typically custom areas, which are a different animal) where dual income households prevail and also a predominance of households consisting of cultures where it is commonplace to have 3+ monthly incomes coming in will tend to be more stable (read: generally less distress) than areas where there are mostly single-income households, IMHO.

Even if you should purchase a “short-sale” or REO yourself, it may not end up being a “good investment” if there are many more “short-sales” or REO’s still “in the pipe” in that area.

IMO, you should really just focus on your micro-areas and again, in this economy, the most important questions to ask yourself are, WHO are these homeowners, HOW do they make their livings, and HOW long have they owned there? IOW, is the area stable :=]

[bearishgurl]

The way I see it, Scarlett, you can’t speculate across the board what will happen with interest rates as a whole in order to make an educated buying decision. They will fluctuate throughout your lifetime and in ALL times good opportunities exist to buy and sell RE. All you can do here is study your OWN market of interest to make an average determination of (1) WHO are the typical homeowners in your own market of interest? (2) HOW do these homeowners make their living? (3) What is the average length of time of homeownership there? (4) Why do these particular types of homeowners own in this particular area? (5) What is the ratio of homeowners to renters there? (6) What is the ratio of dual-income (or more) households to one-income households there? (7) What are the carrying costs for a homeowner in this area and what services do they include? Would I use all those services? (8) What would my daily life be like if I lived in that area (commute, etc)? (9) What could I likely get for rent on a consistent basis in any market if I had to move away for job or family reasons? (10) What is the current percentage of distressed properties in this area (“short-sales,” filed NOD’s and NOS’s, REO’s)?

If your window of ownership is intended to be long-term, ask yourself if the property would still serve your needs if you were at a different “station in life” than you currently are. If you are short on downpayment funds, ask yourself if the typical seller in this area has the ability and willingness to assist you (i.e, OCB, 2nd TD, straight note or balloon payment for 5-10 years).

IMO, a lot of distress in an area does not bode well for the stability of the typical homeowner there. Also, in tracts (NOT typically custom areas, which are a different animal) where dual income households prevail and also a predominance of households consisting of cultures where it is commonplace to have 3+ monthly incomes coming in will tend to be more stable (read: generally less distress) than areas where there are mostly single-income households, IMHO.

Even if you should purchase a “short-sale” or REO yourself, it may not end up being a “good investment” if there are many more “short-sales” or REO’s still “in the pipe” in that area.

IMO, you should really just focus on your micro-areas and again, in this economy, the most important questions to ask yourself are, WHO are these homeowners, HOW do they make their livings, and HOW long have they owned there? IOW, is the area stable :=]

[bearishgurl]

The way I see it, Scarlett, you can’t speculate across the board what will happen with interest rates as a whole in order to make an educated buying decision. They will fluctuate throughout your lifetime and in ALL times good opportunities exist to buy and sell RE. All you can do here is study your OWN market of interest to make an average determination of (1) WHO are the typical homeowners in your own market of interest? (2) HOW do these homeowners make their living? (3) What is the average length of time of homeownership there? (4) Why do these particular types of homeowners own in this particular area? (5) What is the ratio of homeowners to renters there? (6) What is the ratio of dual-income (or more) households to one-income households there? (7) What are the carrying costs for a homeowner in this area and what services do they include? Would I use all those services? (8) What would my daily life be like if I lived in that area (commute, etc)? (9) What could I likely get for rent on a consistent basis in any market if I had to move away for job or family reasons? (10) What is the current percentage of distressed properties in this area (“short-sales,” filed NOD’s and NOS’s, REO’s)?

If your window of ownership is intended to be long-term, ask yourself if the property would still serve your needs if you were at a different “station in life” than you currently are. If you are short on downpayment funds, ask yourself if the typical seller in this area has the ability and willingness to assist you (i.e, OCB, 2nd TD, straight note or balloon payment for 5-10 years).

IMO, a lot of distress in an area does not bode well for the stability of the typical homeowner there. Also, in tracts (NOT typically custom areas, which are a different animal) where dual income households prevail and also a predominance of households consisting of cultures where it is commonplace to have 3+ monthly incomes coming in will tend to be more stable (read: generally less distress) than areas where there are mostly single-income households, IMHO.

Even if you should purchase a “short-sale” or REO yourself, it may not end up being a “good investment” if there are many more “short-sales” or REO’s still “in the pipe” in that area.

IMO, you should really just focus on your micro-areas and again, in this economy, the most important questions to ask yourself are, WHO are these homeowners, HOW do they make their livings, and HOW long have they owned there? IOW, is the area stable :=]

[bearishgurl]

The way I see it, Scarlett, you can’t speculate across the board what will happen with interest rates as a whole in order to make an educated buying decision. They will fluctuate throughout your lifetime and in ALL times good opportunities exist to buy and sell RE. All you can do here is study your OWN market of interest to make an average determination of (1) WHO are the typical homeowners in your own market of interest? (2) HOW do these homeowners make their living? (3) What is the average length of time of homeownership there? (4) Why do these particular types of homeowners own in this particular area? (5) What is the ratio of homeowners to renters there? (6) What is the ratio of dual-income (or more) households to one-income households there? (7) What are the carrying costs for a homeowner in this area and what services do they include? Would I use all those services? (8) What would my daily life be like if I lived in that area (commute, etc)? (9) What could I likely get for rent on a consistent basis in any market if I had to move away for job or family reasons? (10) What is the current percentage of distressed properties in this area (“short-sales,” filed NOD’s and NOS’s, REO’s)?

If your window of ownership is intended to be long-term, ask yourself if the property would still serve your needs if you were at a different “station in life” than you currently are. If you are short on downpayment funds, ask yourself if the typical seller in this area has the ability and willingness to assist you (i.e, OCB, 2nd TD, straight note or balloon payment for 5-10 years).

IMO, a lot of distress in an area does not bode well for the stability of the typical homeowner there. Also, in tracts (NOT typically custom areas, which are a different animal) where dual income households prevail and also a predominance of households consisting of cultures where it is commonplace to have 3+ monthly incomes coming in will tend to be more stable (read: generally less distress) than areas where there are mostly single-income households, IMHO.

Even if you should purchase a “short-sale” or REO yourself, it may not end up being a “good investment” if there are many more “short-sales” or REO’s still “in the pipe” in that area.

IMO, you should really just focus on your micro-areas and again, in this economy, the most important questions to ask yourself are, WHO are these homeowners, HOW do they make their livings, and HOW long have they owned there? IOW, is the area stable :=]

[Scarlett]

I think we are moving away from the topic which is more general and discussing (shadow) inventory, rates and prices in general…I am not saying how, if at all, it will affect my decision to buy.

I thought I won’t take the bait but…
How do you propose finding out #1 and #2 above? Knock at their doors and ask ’em? One knows that much AFTER living in the neighborhood for a while. (And RENTING in a PARTICULAR Micro neighborhood to road test it for a couple years is often not feasible/practical.).

Not saying it isn’t good to know, but, is it that important? Isn’t a general feeling, and knowing that some co-workers live in the more GENERAL area, enough? I don’t feel like striking conversations with strangers, unless they are parents with kids playing with mine in the park.

If you mean, in general, by hanging out at the parks with kids, or in the local shopping centers, or by driving on the streets at different times…then of course everybody does that.

[Scarlett]

I think we are moving away from the topic which is more general and discussing (shadow) inventory, rates and prices in general…I am not saying how, if at all, it will affect my decision to buy.

I thought I won’t take the bait but…
How do you propose finding out #1 and #2 above? Knock at their doors and ask ’em? One knows that much AFTER living in the neighborhood for a while. (And RENTING in a PARTICULAR Micro neighborhood to road test it for a couple years is often not feasible/practical.).

Not saying it isn’t good to know, but, is it that important? Isn’t a general feeling, and knowing that some co-workers live in the more GENERAL area, enough? I don’t feel like striking conversations with strangers, unless they are parents with kids playing with mine in the park.

If you mean, in general, by hanging out at the parks with kids, or in the local shopping centers, or by driving on the streets at different times…then of course everybody does that.

[Scarlett]

I think we are moving away from the topic which is more general and discussing (shadow) inventory, rates and prices in general…I am not saying how, if at all, it will affect my decision to buy.

I thought I won’t take the bait but…
How do you propose finding out #1 and #2 above? Knock at their doors and ask ’em? One knows that much AFTER living in the neighborhood for a while. (And RENTING in a PARTICULAR Micro neighborhood to road test it for a couple years is often not feasible/practical.).

Not saying it isn’t good to know, but, is it that important? Isn’t a general feeling, and knowing that some co-workers live in the more GENERAL area, enough? I don’t feel like striking conversations with strangers, unless they are parents with kids playing with mine in the park.

If you mean, in general, by hanging out at the parks with kids, or in the local shopping centers, or by driving on the streets at different times…then of course everybody does that.

[Scarlett]

I think we are moving away from the topic which is more general and discussing (shadow) inventory, rates and prices in general…I am not saying how, if at all, it will affect my decision to buy.

I thought I won’t take the bait but…
How do you propose finding out #1 and #2 above? Knock at their doors and ask ’em? One knows that much AFTER living in the neighborhood for a while. (And RENTING in a PARTICULAR Micro neighborhood to road test it for a couple years is often not feasible/practical.).

Not saying it isn’t good to know, but, is it that important? Isn’t a general feeling, and knowing that some co-workers live in the more GENERAL area, enough? I don’t feel like striking conversations with strangers, unless they are parents with kids playing with mine in the park.

If you mean, in general, by hanging out at the parks with kids, or in the local shopping centers, or by driving on the streets at different times…then of course everybody does that.

[Author]

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