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PerryChase
ParticipantIt seems like 80% of the buyers are “stealth” flippers.
ParticipantI think that given the sky-high prices in California, most buyers are in the Alt-A or subprime segments.
I believe that 100% financing is here to stay. Some lenders will take the risk for the right interest rate or up-front closing costs (whether paid by buyer or seller).
The mortgage business will become like the auto and credit card businesses where everyone can get financed. Do you remember when you needed a down-payment to buy a car, and leasing was only for business executives? Now everyone goes for the low payments.
Only the best credit risk customers will bet the best rates. Everyone else will pay more to defray the losses. So long as buyers only focus on monthly payments, then there’ll always be products to serve that segment. I believe that Interest-Only is how most people will buy houses in the future (interest-only and make principal payment whenever you’re in the mood). That’s the best scenario for the REIC so they can move more houses, and also the best scenario for the lenders because they can increase fees and transaction churn thus creating more profits.
ParticipantIf I were rich I would have an ocean front condo in Miami and party up with latinas on weekends since I love salsa dancing.
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Don't bother with Denver. Set your mind on Miami. The market there is crashing. You will be able to find a nice condo at the low. Right now, the foreigners who own condos in Miami are loosing their shirts (in housing depreciation and dollar depreciation). I think that in 5 years you can grab a 2bd/2bt for under $350k when the fickle investors dump.
Miami is very fun. I love salsa also. Latin dancing is just hot.
Participantwhat about people like me with 800 FICO scores….solid jobs, high income, but no down payment??
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With a solid job and a high income you WILL HAVE a down-payment in 5 years when it's time to consider buying again. You should pray that the 100% financing is gone for good — there will then be less competition when you buy at an affordable price. 🙂
ParticipantI agree with you ucodegen.
The Federal Reserve doesn’t control mortgage rates. It’s all up to the MBS market. The Federal Funds Rate direct affects the Prime — the rate at which business borrow.
I don’t see how a low interest rate regime in America is sustainable because we need to attract foreign investors to finance our deficit spending.
In the 1980s Reagan spent out way to a recovery. Unfortunately, we don’t have that option anymore because of the Iraq War and most importantly because our deficit and debt are already too high.
ParticipantDuck, yes I think that you picked the wrong person to argue with. sdrealtor has always been realistically optimistic about the market. From his previous posts, I can tell that he knows his market inside-out and he’s always cautiously optimistic.
Unlike most of the lousy Realtors you meet at open houses, sdrealtor doesn’t doesn’t have blinders on and ignore the data pointing to a down market. The info is right there for all to see. You just need an inquiring mind.
If you’re a RE professional you should take off your sales and marketing hat when entering this forum. The people here are not likely to be sold on fluff.
ParticipantThanks for posting this interesting article.
The key is FREQUENTLY TRADED. More trades equal more income and profits for Wall Street.
ParticipantOn construction costs, the costs are made up of 3 main components.
1) Labor costs. Those costs have been going up. But as layoffs hit the industry, they will only come down as the current projects are completed and no new projects are on the horizon.
2) Overhead/markup costs. Those consist of mostly builders’ profit, and other costs as supervisory costs. Design profits, etc… Contractors basically want you to pay for their profits but as the work dries up, those will come down drastically.
3) Commodity costs (lumber, sheet rock, etc..) As fewer and fewer projects get green-lighted, the demand for commodities will drop sharply. Look for lower commodity prices.
The building industry has a vested interest in justifying their costs so look at their data in that light.
My take is that the basic cost of building a house in SD is no more than $80/sf, excluding the land.
ParticipantIf I recall from his previous postings Mixxalot is looking at something that’s $250k – $350k, $400k tops.
Mixxalot, I say, rent, wait 5 years then reassess the situation. It’s gonna be 1990 all over again.
Participant“I do know building material has been going up due to energy cost.”
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How do you know?In my view, construction cost will drop 20%-30% from the peak. Contractors are finishing up houses under construction now, but they’ll go begging for work in the next few years.
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From the February 19, 2007 Issue of ENR
Housing Puts Pressure on Lumber PricesLast year, the single-family housing market fell 12% in dollar volume, according to McGraw-Hill Construction. That drop in demand is dragging down lumber prices. In February, ENR’s 20-city average price for the most commonly used species of 2 X 4 lumber fell 5% from the previous month. This follows more than a year of price declines, which leaves ENR’s price 16% below February 2005’s level. Prices for plywood fell earlier during the housing cycle and are now 4% below a year ago.
ParticipantLenders are stopping the 100% financing. What happens when homeowners need to refinance because their loans reset and they can no longer afford the payments?
1) They can’t get financing because there are no loan products available. And the house won’t appraise at a higher value.
2) They can’t sell because they have no equity. 6% of a $600,000 house is $36,000. Can sellers come up that the cash on closing?
I see foreclosures on the horizon…..
ParticipantCow_tipping made a very good point on subprime on the OC tread. I’m putting the feedback here to keep the topics in order.
Here’s what he said about subprime.
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Nationwide its ~10% of total outstanding mortgages by number, not amount, but number. However that includes the 30 yr mortgages that originated in 1977. Last 3 years the sub primes were much much higher and that is nationwide. CA presumably has much more jumbo, alt A, subprime and no doc, and heck lots of super stretch mortgages as in someone who can get a 300K house, cant find one for 300 so he gets a 800K house hoping he’d be bailed out when his house triples in value. Huge huge numbers. And surprisingly, 2% is enough to crash the market. Housing without someone living in it cost you a lot …
Cool.
Cow_tipping.
—————–That’s an excellent point. The most recent mortgages in California are mostly subprime. Massive defaults on the mortgages issued the last two years may well crash the market.
ParticipantHere’s the latest news on WMC. They are based in Woodland Hills so that will affect California. 20% of workforce laid off.
So HSBC bought Household for $14.2 billion in 2003. And recently HSBC wrote-off nearly $11 billion in bad debt.
How much did GE pay for WMC? What about Wells Fargo acquisition of a subprime lender?
Sure the big banks will survive. But it looks like their forays into the subprime business resulted in big losses. They would’ve been better off growing those divisions internally over time.
ParticipantSubprime mortgage woes may be spreading
Losses are creeping up on so-called Alt-A home loansSAN FRANCISCO (MarketWatch) – Problems in the subprime mortgage business may be spreading to other parts of the home loan market.
Losses are creeping up on so-called Alt-A loans, which are considered less risky than subprime mortgages, but may have lower credit quality than “prime” loans.
That’s sparked concern among investors in companies such as IndyMac Bancorp, Countrywide Financial Corp, and even General Motors.Subprime mortgages are offered to lower-income borrowers with spotty credit records. The sector has descended into crisis recently as rising interest rates and stagnant home prices have left more borrowers struggling to meet monthly payments.
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Subprime Defaults Are `Beginning of Wave,’ Bies Says (Update5)
By Alison Vekshin and Anthony Massucci
March 9 (Bloomberg) — The nation’s banks are just beginning to feel the pain of defaults on risky mortgages they made at low introductory rates when housing prices were soaring, U.S. Federal Reserve Governor Susan Bies said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a7iLhjv5Z7Pg&refer=home
————-Banks are just beginning to feel the pain….. Wait ’til they really feel it.
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