So you still think that a 50% correction or more is crazy???

[HereWeGo]

One part of me is saying that those who foreclose, may possibly end up spending more money in the economy once they abandon their insane mortgage payments.

I speculated that may be the case some time ago. The tightening of credit resultant from mass foreclosures would offset that benefit, IMO.

[little lady]

In my area prices have taken a nose dive. Yes, there are the feeble minded folks still asking “585k, for a SFR 1300sq ft, 1972, no ups no extras”. They are clearly in the minority. All the good deals are REO’s and short sales.

However, when a decent size, good neighborhood, with pool, comes on @ 385k to 399k it’s quickly scooped up. These are regular loans. If they are going that fast still, to me that says people who can afford to buy, are gonna buy at that price, so how can it go lower? Over 50% would be several hundred dollars less than going rent…….

[little lady]

In my area prices have taken a nose dive. Yes, there are the feeble minded folks still asking “585k, for a SFR 1300sq ft, 1972, no ups no extras”. They are clearly in the minority. All the good deals are REO’s and short sales.

However, when a decent size, good neighborhood, with pool, comes on @ 385k to 399k it’s quickly scooped up. These are regular loans. If they are going that fast still, to me that says people who can afford to buy, are gonna buy at that price, so how can it go lower? Over 50% would be several hundred dollars less than going rent…….

[bsrsharma]

This is from Michigan; but I am not conviced it can’t happen in California or SD.
——————————————————-

The Flint Journal from Michigan. “Kevin and Kassie Gast listed their four-bedroom home in Grand Blanc’s tony Kirkridge Hills subdivision last July for $267,000.”

“When it didn’t sell in three months, they repainted and recarpeted, and lowered the price to $230,000, then to $220,000 and again to $203,000. Finally, in July they slashed it to $199,000.”

“No luck yet. ‘I haven’t received a single offer,’ said Kevin Gast, who moved from the area with his family to work.”

“Gast might have to lower his asking price even more to compete in today’s local housing market. During the past year, the average sale price of homes has dropped in every school district in Genesee County, according to a new survey by the Flint Area Association of Realtors.”

“There are more than 8,000 homes for sale across the county, a number that’s been climbing by about 1,000 each year for the past three years. Real estate agents say a whopping 45 percent of area homes for sale are foreclosures, the bulk of them in Flint. Agents said banks are accepting offers so low they are driving down the price of other homes.”

“Gast said he’s willing to take a hit in the pocketbook just to unload his 2,800-square-foot home, which he bought seven years ago for $215,000.”

[bsrsharma]

This is from Michigan; but I am not conviced it can’t happen in California or SD.
——————————————————-

The Flint Journal from Michigan. “Kevin and Kassie Gast listed their four-bedroom home in Grand Blanc’s tony Kirkridge Hills subdivision last July for $267,000.”

“When it didn’t sell in three months, they repainted and recarpeted, and lowered the price to $230,000, then to $220,000 and again to $203,000. Finally, in July they slashed it to $199,000.”

“No luck yet. ‘I haven’t received a single offer,’ said Kevin Gast, who moved from the area with his family to work.”

“Gast might have to lower his asking price even more to compete in today’s local housing market. During the past year, the average sale price of homes has dropped in every school district in Genesee County, according to a new survey by the Flint Area Association of Realtors.”

“There are more than 8,000 homes for sale across the county, a number that’s been climbing by about 1,000 each year for the past three years. Real estate agents say a whopping 45 percent of area homes for sale are foreclosures, the bulk of them in Flint. Agents said banks are accepting offers so low they are driving down the price of other homes.”

“Gast said he’s willing to take a hit in the pocketbook just to unload his 2,800-square-foot home, which he bought seven years ago for $215,000.”

[betting on fall]

I too agree that the foreclosures will cause a lot of short term pain, but we will have a healthier and better local economy when people are only spending 30% or less of their income on housing, and the rest is either saved or spent in the community. San Diego employeers will have a much easier time attracting workers too.

Funny how affordable housing is supposed to be a good thing until all houses are suddenly getting more affordable at the same time.

[betting on fall]

I too agree that the foreclosures will cause a lot of short term pain, but we will have a healthier and better local economy when people are only spending 30% or less of their income on housing, and the rest is either saved or spent in the community. San Diego employeers will have a much easier time attracting workers too.

Funny how affordable housing is supposed to be a good thing until all houses are suddenly getting more affordable at the same time.

[brian_in_la]

Bob – People get divorces and lose jobs (and get nice offers in Chicago, Atlanta, etc.) There are other reasons why people put houses on the market besides financial distress on the one hand or wanting to trade up to a nicer McMansion.

Lady – Yeah, 50% is harsh. However, if I remember correctly, rents also declined slightly during the last bubble-burst in SD. With lots of supply of sfr and condos coming on-line, rents may go down. So, going rent may be going down. Just for the record – I’m with you…50% in nominal terms seems unlikely (though, inflation adjusted in 8 years?….who knows….)

[brian_in_la]

Bob – People get divorces and lose jobs (and get nice offers in Chicago, Atlanta, etc.) There are other reasons why people put houses on the market besides financial distress on the one hand or wanting to trade up to a nicer McMansion.

Lady – Yeah, 50% is harsh. However, if I remember correctly, rents also declined slightly during the last bubble-burst in SD. With lots of supply of sfr and condos coming on-line, rents may go down. So, going rent may be going down. Just for the record – I’m with you…50% in nominal terms seems unlikely (though, inflation adjusted in 8 years?….who knows….)

[bsrsharma]

all houses are suddenly getting more affordable at the same time.

Some people consider it as becoming less "Wealthy". Since most of the national "Wealth" is home equity, cutting it by a factor of two or more can have strange psychological effect on who we are and how well we are. This is what economists are afraid of. Fear of "Poverty" can produce some bad effects like real poverty. Just the opposite of the “Wealth Effect”

[bsrsharma]

all houses are suddenly getting more affordable at the same time.

Some people consider it as becoming less "Wealthy". Since most of the national "Wealth" is home equity, cutting it by a factor of two or more can have strange psychological effect on who we are and how well we are. This is what economists are afraid of. Fear of "Poverty" can produce some bad effects like real poverty. Just the opposite of the “Wealth Effect”

[gn]

Who are you referring to? If they are "weathering the storm", the what difference do the comps make? It seems like the referral to these type of people on this board categorize them as having affordable mort. and want to live in their house long term

Bob2007, I think JWM was refering to the following case:

John Doe bought his house in 2002 with a 3yr-ARM. In 2005, when the ARM resetted, he had a lot of equity & was able to refinance into another 3yr-ARM.

In 2008, when the ARM will reset, if prices go down significantly, John Doe may not have the equity need to refinance again. Some people may think that home prices in 2002 was "low" enough for people who bought at that time will be able to "weather the storm", but it all depends on the financing used to purchase the house.

 

[gn]

Who are you referring to? If they are "weathering the storm", the what difference do the comps make? It seems like the referral to these type of people on this board categorize them as having affordable mort. and want to live in their house long term

Bob2007, I think JWM was refering to the following case:

John Doe bought his house in 2002 with a 3yr-ARM. In 2005, when the ARM resetted, he had a lot of equity & was able to refinance into another 3yr-ARM.

In 2008, when the ARM will reset, if prices go down significantly, John Doe may not have the equity need to refinance again. Some people may think that home prices in 2002 was "low" enough for people who bought at that time will be able to "weather the storm", but it all depends on the financing used to purchase the house.

 

[lonestar2000]

Many of those who are losing their homes due to foreclosure today are going to want to purchase again, havnig learned from their mistakes.

I see a majority of them saving, rather then spending the extra money freed up after the foreclosure, so they can do it right the next time.

There are going to be those who will spend the extra money, there always are, but I think many of them will use the experience to re-evaluate their habits.

A significant portion of the population still would prefer owning over renting.

[lonestar2000]

Many of those who are losing their homes due to foreclosure today are going to want to purchase again, havnig learned from their mistakes.

I see a majority of them saving, rather then spending the extra money freed up after the foreclosure, so they can do it right the next time.

There are going to be those who will spend the extra money, there always are, but I think many of them will use the experience to re-evaluate their habits.

A significant portion of the population still would prefer owning over renting.

[Author]

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