TSUNAMI

[little lady]

I visit this other realtestate blog site frequently and found this comment I wanted to share, here it is………..

“What none of us know is just how big is this wave going to be. Will it be just your average tidal wave, or a real tsunami? Remember that almost all of the trouble happening with the subprime market is happening because of loans made just LAST YEAR!! It is the 2006 Voodoo loans that are proving to be garbage in a big way. And why? Because this market ran out of entry level buyers sometime in 2005. By then, 70% of all folks were in. But in order to keep the music playing, the Voodoo industry had to make it possible for the walking dead to buy in. We know what happened. They made absurd loans of 100s of $1000s to people who couldn’t keep current on their cell phone accounts. We shall now reap what we have sown.”

[little lady]

I am a big believer in “you reap what you sow”. Greed will getcha’, dishonesty will getcha’, karma baby……ttfn

[Bugs]

It isn’t just those who purchased, it’s also anyone who maxed out their mortgages. There were usually lots more refis than purchases during any given year.

[little lady]

Absolutely!

I hear gloom reports, I hear never ending bull reports….

What I believe is something somewhere in the middle, houses WILL drop at least another 10% and then the market will stagnate, until incomes catch up. To me that means mid 300k’s. Rents are at a mortgage payment of around 300k and when prices come down to where(mid 300k’s) they are close to renting/and it pays to buy rather than rent, that’s when the market will turn around. I think that time is what the SD realtor’s have been saying, FALL ’08. However, everyone is different and your needs are not mine. I will buy when I can get what I want and it makes sense, with a VA loan, fixed for 30 years.

It doesn’t make sense to me to wish for anything more, houses have always been a little more than we’d hope for.
In other words NOT cheap. I don’t expect miracles. I don’t expect to steal from some poor slob who can’t afford his house anymore. I expect to buy what I can afford at a fixed rate. I expect to get what I pay for.

Goodnight,
Happy St. Patrick’s Day

[Bugs]

Another 10% isn’t even close to closing the gap to within reason between rents and mortgages.

[little lady]

I guess that depends where you are looking. In my neck of the woods, you can buy a decent, entry level house for around 400k. If it were to come down 10% that would be 360K, with just 10% down @5.68 (current standard interest rate according to bankrate @ http://bankrate.com/# ) that makes the payment around 1900 P.I., plus taxes and insurance. Rents around here are about 1800-2200 dollars so it makes rents a little closer to mortgage payments.

However, I DID say I thought house prices would stagnate. I believe this will happen until incomes catch up . Now I don’t KNOW anything, but I BELIEVE it will go something like that.

[ibjames]

in my neck of the woods, that means it would be a LOOOOONG time before incomes catch up. I think more of a decline has to happen

[(former)FormerSanDiegan]

Another 10% isn’t even close to closing the gap to within reason between rents and mortgages.

It depends on how long it takes. If another 10% decline happens this year, then yes I’d agree with Bugs on this. But, consider the effect if it happens over a longer time frame. Assume we are already down 10% over the past 1.5 years for comparable property. If the next 10% down-leg in nominal price occurs over say 5-6 years, we could easily be looking at a 40% or more real decline. 20% due to nominal price drops and 20% (or more) due to the cumulative effects of inflation. I would not discount a 10-15% further nominal price decline, since it depends on how long it takes to be carried out.

[little lady]

FormerSanDiegan

I consider that “decline of 10%” happening and stagnation, then annual inflation(or cumulative effects of, however you say it), so it (probably) works out in my mind simular to what your saying.

“Assume we are already down 10% over the past 1.5 years for comparable property.”

My house sold for more like 15% less than it did @ the “height” of the market”(that is if it goes through).

Certainly, other places in San Diego are more out of whack with rents, than mine.

[(former)FormerSanDiegan]

little lady – I think we are on the same page.
I’d guess a total 40-45% real price drop over 5-7 years. Some due to inflation, some due to nominal price declines. Somewhere in the archives I put my guess at 19-25% nominal price decline and another 15-20% due to inflation.

For perspective, consider the period from 1990 to 2000. The median rent in San Diego county was $564 in 1990 and grew to $761 in 2000 … and that decade included a recession, local unemployment that exceeded the already high national levels, and a fairly prolonged housing bust. With those headwinds there was still an increase in rents of about 35 percent over a decade. Or an average of about 3%+ per year.
In fact inflation may be worse this decade.

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