Who Are These People Anyways?

[Eugene]

” I still don’t see that 17% were leveraged to 90%. You are assuming that every one of those 123,000 was ??
What month is that 123,000 through ? Recent sales haven’t dropped as much.

In any case, well over 80% probably don’t have any problem.
Over 95,000 homes have no mortgage at all.”

123,000 is from January 2005 to July 2007. If national averages apply to SD, they were, on average, leveraged to 91%. I think San Diego should be higher simply because San Diego prices are much higher. In any case, 40% of 123,000 got interest-only or negative amortization loans and I don’t imagine many of those putting any money down at all.

I think the situation is this –
20% of people have their houses paid off completely
40-50% have a lot of equity
15-25% are at risk of going under water (negative equity) if prices decline another 20%
15% are under water already

and “under water” is DEEP under water, because prices are so high. If someone buys a median house with 0 down interest-only at the peak and that house depreciates just 20%, that person is under water for about 2x average annual household income in San Diego. Have things ever gotten so bad during 90’s?

P.S. I screwed up, 123k is 22% of 550k.

P.P.S. There’s also Temecula and Murrieta. That’s where things are really fun. Around 20k new and existing houses sold in 2005-2007 vs. total housing stock of 40-50k houses.

[HLS]

ESM,
I’m not disagreeing with you. (I also saw that 123K wasn’t 17% of 550K, thus my confusion)

Having the median drop 20% doesn’t mean that a median house a year ago is the same property at a median value today.
I still don’t know why median is even mentioned.

20%+ declines have already occurred in some areas, and 50%-60% falls won’t surprise me. A real depression won’t surprise me at some stage either.

Great discussion, thanks.

In any case, the 90’s wasn’t as bad around here. People who did lose homes, lost them with down payments invested.
It was mostly due to job loss and soft economy.
There was no 100% financing. I think that 97% FHA was the closest that we got, but plenty of nice homes were $250K or less.

100% +/- financing is what is going to make this correction bigger and better than any fireworks show. My condolences to anyone who bought in 2005–06.

Late 80’s early 90’s, $100-$125K bought a basic 3/2 in many inland areas. I don’t remember that prices slid more than about 20% by late ’96 and the recovery started about then.

It wasn’t until after the dot com bubble and 9-11 that low interest rates and 100% financing fueled the flames that lasted about 5 years.
While prices moved up rapidly, rents were way behind.
A 150% rise in prices was met with about a 50% rise in rents.

It wasn’t making sense, but it kept right on going.

I’m in the mortgage biz in Murrieta, I know the market well.
It’s going to get beyond ugly.

[Coronita]

Who are all these people buying houses in the 900K-1 Plus Million dollar range? More to the point, why are all these other people and POSTING their houses in the 900K-1 Plus Million dollar range. Who do they think they're selling their houses to? There just CAN'T be that many Charger Football players looking for a home in San Diego. It's even more incredulous that they think they can sell their homes when lenders are tightening their purses. Unless you have a couple of 100K sitting in your wallet, lenders won't lend you money AND if you don't have pristine credit or if you're not willing to bite on a 7.8+% interest rate, you can just forget it. I hear case after case of people falling through escrow because lenders on a week to week basis have newer and stricter guidelines that make house loans impossible to fund. Don't the sellers know that? Are they confused by their own delusions of grandeur or (more or less likely) are their real estate agents not being real enough with them?

There must still be people floating in the stratosphere with bubbles that haven't burst. It's going to be a long hard crash.

 

There is some flaw in this logic. Funding is still there with people with good credit, good income. All this mess really has done it made it more difficult for people who wouldn't normally have qualified to begin with.

I would expect a lot of housing shakeout soon. More price differentiation between what $900-$1million really is.

 

[kewp]

There is some flaw in this logic. Funding is still there with people with good credit, good income. All this mess really has done it made it more difficult for people who wouldn’t normally have qualified to begin with.

Yup! If anything, this shakeup is going to keep the po’ folk from owning for a long, long time.

There will be lots of cheap rentals in the IE tho, thats for sure.

[Author]

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