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powayseller
Participantirvinesinglemom – Today’s rentals are in the nicest neighborhoods; nobody will ever know you are renting if you live in a rental house vs. a rental apartment. We sold our house, and our family, w 3 kids, is renting for at least 2 years. My kids stayed in the same schools they attended since 2000. We live in a neighborhood with homeowners, and a few renters. How do you know who rents, who owns? You only know if you ask.
One thing I noticed over several moves we had to make within the same city: the kids were practically unaffected by moves that allowed them to stay in the same school. Moving homes was exciting to them, as long as they could stay in the same school. Moves that required changing schools was a little scary.
Home prices are dropping several percentages each month. Your income does not make you wealthy enough to afford a loss of 50% on a $ 800K house. Such a loss could seriously set you back.
Patience, and remember, your childhood moves were difficult because you changed cities and schools, and back then, “rental neighborhoods” were low class and undesireable. Today, investors snapped up rentals in all the best neighborhoods. You can be an closet renter in the best subdivisions, and you can choose to rent in a neighborhood that feeds into the same schools where you eventually want to buy. Then, when you are ready to buy, your son will have the same friends he had in preschoool. That is something my kids have, that I did not, and I wanted to provide for my kids too. I have done so, and with renting, I have provided more financial security for my children.
ParticipantI think we’re going to see a lot of families moving back in with Mom and Dad, or with their grandparents, or sisters/brothers.
What else can you do when you are foreclosed on, and have no money to make a deposit on a rental unit?
Well, I am going to try to get out of the house for a while, despite my leg injury. It’s such a beautiful gorgeous day, and my kids are too precious to keep ignoring. (I’ve got the greatest kids, I really do… better attend to them so they don’t turn out bitter like our friend barnaby)
ParticipantAre you sure Bugs? With housing prices so high now, and interest rates up, who can really afford these homes? Remember that the majority of buyers qualified for teaser rates of 3%. How many people qualify now for those same houses, with teaser rates at 5%, i.e. a payment almost 50% more? I really think the bubble was popped by high prices and high mortgage payments in the low end, and this started actually in 2004. That’s when inventory started rising.
In April 2004, inventory was 3,000, as it had been for the past few years.
By June 2004, inventory was around 6,000, and by fall, it was 12000. Realtors, feel free to correct those numbers if they are off.
The market softened in 2004, and then the price declines followed after ward.
After the low end softenend, those people could not sell their homes and move up to the 2nd tier, so by 2005 the mid tier softened also. Homes above $500K started dropping in price in 2005.
Now, all homes are dropping in price, as the chain was broken. But remember, the chain was broken in 2004. It takes a long time for these ripple effects to move through the market and economy.
This was explained to me by Bob Casagrand.
If interest rates had stayed low, the chain would have been broken eventually anyway, because people can only afford to pay a certain amount for their home. There is NO way that a starter home could ever end up at $1 mil. How would someone earning $40K/year ever afford it? So it had to top out sometime.
The double whammy of high prices and higher interest rates killed this bubble. Now what brings it down is the reverse psychology. Housing no longer is a sure money maker. Like Bugs said, why stretch into a home if it is no longer going up?
Most people have no idea the market will really fall. All they know is they see the For Sale signs up for many months, and they don’t have that sense of “housing only goes up” anymore. So the rush to buy is gone. Others are turned away when they apply for a loan.
How many people can qualify for a starter home now with interest rates almost double what they were in 2003? So definitely, the number of people who can afford the current prices has declined, because 80% of our buyers were relying on ARMs, and those ARM rates have really shot up.
ParticipantThere are lots of blacks in the Midwest. I was surprised when I moved to San Diego, “where are all the blacks”?
August 6, 2006 at 2:08 PM in reply to: San Diego’s Big Investment in Low Wage Jobs, or Reality Check for Sellers #30952ParticipantPopulation migration into San Diego was positive, about 50K/year for many years, and has now reversed. With the upcoming job losses in construction, real estate, and lending, and retail/restaurant, and companies like Nokia downsizing, this trend of homebuyer-aged people leaving will continue.
I’m sure that eventually growth will pick back up again, after housing prices fall to a level that is a reasonable multiple of wages.
ParticipantI know the toughest part for realtors now is dealing with seller denial. Isn’t there something to be said to wake them up?
Does the seller understand the concept of competition with other sellers? With inventory at 23,000, and only 3000 sales per month, that is 8 listings per buyer. I know you adjust this for their own neighborhood. I guess some neighborhoods might have only 3 listings/buyer, while others could have 12 or 15, right? What does a seller do with information like that?
Does the seller say anything at all when you show them a list of properties which have lost value since the last sale? There are many presented on this blog. Do you tell people “Hey, we are back at 2004 and 2005 prices”.
I bring this up, because I stopped by the Help U Sell office last week, and my realtors told me the hardest part is getting sellers to price their properties at a realistic price.
ParticipantI believe we are going to see a national housing price decline. It is already starting. National data from home builders and the NAR shows high cancellation rates, overbuilding, high inventory, longer days on market for the entire country. National home builder stocks are down 50%.
With a national housing bubble, I would not buy anywhere. And since I am renting, I would like to rent in San Diego. The only reason for us to leave would be unemployment.
Housing prices did not go up much in most of the country, but they will suffer “bubble like” effects due to exotic lending. Although houses in Omaha, NE went up with inflation the last few years, buyers overstretched into homes they cannot afford, with adjusting mortgages that they won’t be able to pay, and therefore housing prices will fall nationwide. I predict a 10-15% real decline in the next 2 years for the U.S housing market as a whole.
Participantduplicate (server slow …)
ParticipantRolling wave for the nation. Recession will start in Q1 07, unemployment will rise, and the winter selling season will be dismal for those who need to sell. By next summer, psychology will be real bad, buyers’ fear will grow, and by 2009, people will be in panic mode. If you are a seller in 2008 or later, it will seem like the buyers have really disappeared.
I don’t know if the Fed can lower interest rates a lot, start a bunch of government works projects or alternative energy projects to reduce our reliance on overseas oil,, all to raise employment, but without any of that help, I think it’s more like a tsunami.
On a related note, when I hear realtors tell me they have buyes waiting on the sidelines for fall for price drops, I feel real bad for my realtor friends. There is NO way that a buyer who is waiting for price drops, will buy in the fall. Why would a person who is waiting for price drops buy when prices are really starting to drop? Wouldn’t that kind of person wait even longer, to see how much further they will fall?
Most of the buyers out there now are the ones who don’t understand asset bubbles. The rest, a minority, know prices can drop but don’t care. I presume they don’t care because they have NO idea how far they can go down.
August 6, 2006 at 10:13 AM in reply to: Mortgage Lender to Answer Questions that You May Have #30925Participantx1y2z3, thanks for all those insightful answers. That was a lot of typing. It’s really great to have an insider’s view of the mortgage industry.
Could you elaborate on the ARM resets? Someone on this forum thought ARM resets would not affect most of the people who took them out, since there is a large group of people who will get 25-50% pay raises within their adjustment period. He cited professionals in startup positions in engineering, law, or doctors. If the doctor took an ARM while in residency, he would surely be able to pay the new mortgage when he’s a full doctor earning much more. I’m wondering for your own experience, how many of the people you saw, who took out adjustable loans, were in jobs like this, or expected promotions.
How many people thought ahead of how high their payments could go? Or was the idea that they would just refinance when it got too high? In other words, how many people are even aware yet of what will hit them?
What did your office do with the loans after purchase? I am interested in learning more about what happens after the loan is sold off, who buys them, and WHY they would take on such high risk. Is this MBS owned by all of us, without our knowledge, i.e. in our money market holdings, pension funds? How much of the City of San Diego pension money is in 2nd mortgages or MBS or CMOs? Perhaps we cannot find out.
I personally think the ARM resets are going to make this housing bubble bust worse than any in history, and they are causing the market to soften nationwide. I was in Omaha, NE this summer, and I saw “price reduced” in housing ads. A friend told me one builder went under, and her office did one 3/1 ARM for a non-English speaking woman who had 5 half-dressed kids in tow and didn’t even own a car. People all over stretched into homes with subpar credit and qualifying on those teaser rates. For this reason, the reset problem will bust housing nationwide.
Are you still in the mortgage industry?
Participantforeclosure.com
ParticipantPrivatebanker wrote “What average renter can afford to pay $2,500 per month?” I agree completely – not many. Median household income in San Diego is “according to the San Diego Association of Governments the county’s median household income is $64,273”. Deduct taxes and insurance co-pays of 20%, leaves $51,418. I will divide by 13 (2 months of the year have 3 paychecks, but you don’t plan your rent around that 3rd paycheck), to get monthly income of $3955. How much of that would you pay on rent? Half? Not even! You would pay 30-40%, max, on rent, making a median sustainable rent $1186 – $1582.
“The San Diego Association of Governments estimates that 172,000 local employees, or 13 percent of the work force, earn less than $8.35 an hour.
San Diego County’s high housing prices, coupled with its relatively low wages, make it the third least affordable major metropolitan area in the country. (National Association of Home Builders, 2006) ”
This is a low wage city. Each time I go to the County Fair, I realize this is a low wage city. Rents are driven by the masses, by the people at the fair.
ParticipantI doubt it. The UCLA Anderson Forecast exlained that rising benefits costs are to blame for lower wages. Employees’ pay increase is going more and more to their health insurance.
Real hourly wages ” exclude nonwage forms of compensation — health care benefits, employers’ share of social security contributions, and the like. ” This guy says real compensation is up over 1% annually since Bush took office. Maybe so, but if people take home less money every year, they don’t really appreciate that their employer is paying more for health insurance on their behalf. All they know is they have less money in their paychecks. And by that measure employees are definitely falling behind.
August 5, 2006 at 10:12 PM in reply to: Mortgage Lender to Answer Questions that You May Have #30895ParticipantX1Y273 – you are such a welcome addition to the forum. I’ve waited for 9 months for you!
The main question I have would be adddressing those on this forum who say that ARMs are not a big problem, because people will just refinance. I’ve posted this is usually impossible due to the higher interest rates that would prevent people form qualifying, and the loss of equity. Could you provide more details on the possibility of people refinancing out of these time bomb loans?
What is the usual income for someone buying the $1 mil tract homes?
How popular was equity cash-outs for people who bought their homes before 1999, esp. those who owned their homes since 20 years or more?
What is the financial situation of seniors?
Did your company keep statistics on loans given and loan performance? Where can we get data on the types of loans given in San Diego?
Does anyone keep data on CLTV? When someone gets an 80/20, isn’t that recorded as a loan with 20% equity?
What is the role of global investors, and what is the change in the risk premium they command?
How is the rising foreclosures affecting your bank’s lending guidelines? Do you have any thoughts on GSEs, CMOs or MBS?
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