The housing thing is really interesting to watch. It comes down to what owning a house means to the individual. For me and my wife, it is a place that provides shelter. A place we feel safe. We own it and as long as we pay our taxes, we will always have a place to call home. We love our yard and I have a place in the country to shoot my guns and play around with my tractors. Now it appears some people are really hung up on how much the house is worth. To me it really matters not except that the more it is valued, the more the county charges me in taxes. We don’t use our home as an ATM, so I could give a hoot how much equity is there. The only time it is ever going to matter is when (if) we sell. As long as our jobs remain good and we like the area, we’ll stay put. Been there nine years and may be dug in for the duration. My own opinion is that home prices are way out of whack with salaries. But, if there are enough people willing to use exotic financing, the housing bubble could go on forever. One idiot loses the home due to a reset, but another one steps up and finances with a new loan, with a teaser rate. They lose the home and yet another idiot steps up. The losers are the “homeowner wannabe’s”. I think as long as the banks can get a loan on the home, they will be fine. Look at what people are willing to pay for a car. They are willing to take on a loan as long as 72 months now. That, is crazy. So, they continue to fuel things. Instead of car prices dropping, the length of payoff has been extended. Hard to say how things will play out. At some point maybe people will be so burdened by debt that something will give.
“I believe most of these predictions are based on sour grapes (regretting missing the opportunity to buy earlier) or just general resentment of people who became wealthy in the boom market”
Most active people in this forum (who beleive that housing will decline 30-50%) are actually people who sold at the peak and are sitting pretty on a lot of cash. A lot of them are actually pretty wealthy. So I don’t see ur point here.
The mortgage resets are a time bomb. Russ Winter did an analysis of Cagan’s Sept 2005 paper on mortgage resets.
“Conclusion: if we use a 10% drop in housing price combined with a trillion in new mortgage debt since the Sept. 2005 First American survey, we can easily visualize well over a trillion in mortgages showing serious negative equity, and nearly two trillion having no equity. All this, while rate resets keep going on like firecrackers.” link
Today I met a real estate investor who currently buys high end vacation homes near Palm Springs, FL. He’s cash flow positive, because he only needs to rent each house 4 months of the year for $10K/month to break even; I think he’s using I/O loans. He buys at least one home every year, and says this year is no exception. He believes prices may go down for 1-2 years, no more than a 5% drop, and then start going up again. This guy has been through both San Diego housing busts in the 80s and 90s, and says that the best investment from a tax standpoint is real estate.
“If you bought into this premise two and a half years ago and decided not to buy because you thought things had peaked, you missed a huge run up in the value of what would now be your home”
The median prices has been flat for over two years in San Diego. This means if you tried to flip a house any time in the last two years, you would basically be out 6% in comission and closing costs. Many neighborhoods are down 10% from two years ago.
Phoenix is a little different because its run-up came later. However, this site was founded on San Diego data.
Even if you time it perfectly, buying in Sept. 04 and selling in Nov. 05, you still only make 2% after real estate and closing costs, with ALOT of work, hassle, and time spent.
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