Fergasun Posted October 27, 2006 Share Posted October 27, 2006 It looks like some of the housing bubbles are starting to pop. There could be some serious bloodletting in the next 5 years. On our street a 3 bedroom, 1400 square foot townhome has been on the market with an asking price of $450k+. Another home has been on the market for a bit. It's been 4 months for both of these properties. Well over 50% of California homes were bought with ARMs or similar zero down payment + no interest for 5 years. When I do the logic in my mind I don't see things working out. Today I drove into a new development, early phase homes were on the market, and some of the later phases of similar models were just getting finished. I know this is anecdotal, but seems like good news for people like me wanting to buy in the next 3 years. Link to comment Share on other sites More sharing options...
DeanCollins Posted October 27, 2006 Share Posted October 27, 2006 It looks like some of the housing bubbles are starting to pop. There could be some serious bloodletting in the next 5 years. On our street a 3 bedroom, 1400 square foot townhome has been on the market with an asking price of $450k+. Another home has been on the market for a bit. It's been 4 months for both of these properties. Well over 50% of California homes were bought with ARMs or similar zero down payment + no interest for 5 years. When I do the logic in my mind I don't see things working out. Today I drove into a new development, early phase homes were on the market, and some of the later phases of similar models were just getting finished. I know this is anecdotal, but seems like good news for people like me wanting to buy in the next 3 years. time to look at tax records and make low-ball offers to longtime owners with big equity. some of those people have bought another homes and need to sell Link to comment Share on other sites More sharing options...
Thiebear Posted October 27, 2006 Share Posted October 27, 2006 The price of housing fell. The sales of housing went up. My house isn't really worth 450,000 dollars. I bought it 9 years ago for 148,000 and its 60 years old.. It should adjust back down a bit... Link to comment Share on other sites More sharing options...
Larry Posted October 27, 2006 Share Posted October 27, 2006 An anecdotal piece of real estate financial market advice that my bro told me. No idea if it's true, but it makes sense to me. He said, when the price of expensive houses go down, the price of cheap houses go up. (And so do rents.) Link to comment Share on other sites More sharing options...
PleaseBlitz Posted October 27, 2006 Share Posted October 27, 2006 It looks like some of the housing bubbles are starting to pop. There could be some serious bloodletting in the next 5 years. On our street a 3 bedroom, 1400 square foot townhome has been on the market with an asking price of $450k+. Another home has been on the market for a bit. It's been 4 months for both of these properties. Well over 50% of California homes were bought with ARMs or similar zero down payment + no interest for 5 years. When I do the logic in my mind I don't see things working out. Today I drove into a new development, early phase homes were on the market, and some of the later phases of similar models were just getting finished. I know this is anecdotal, but seems like good news for people like me wanting to buy in the next 3 years. Im not sure how it is in Cali, but in NoVa, the housing bubble, well, didnt burst but certainly lost some pressure about a year ago. 2 years ago, houses were on the market for a matter of HOURS before they got a full price offer. Now, almost everything is on the market for a few months. Housing prices are falling slightly. Rates are holding steady for the most part. Right now in NoVa it is a HUGE buyers market. There is so much inventory right now, sellers are competing for the existing buyers, so they are lowering prices, paying closing costs, etc etc. Link to comment Share on other sites More sharing options...
Kilmer17 Posted October 27, 2006 Share Posted October 27, 2006 It's happening here to a smaller degree. Our sales have plummetted, but our prices are still going up. Cant figure that one out yet. Im in the market to steal a house right now. I was on the courthouse steps last week bidding on a foreclosure. Monster house. 4500 SF. They owed 7 and change on it, I was hoping to get it around 650. But it got bid to 8. There are lots and lots of people who interest only or 3 year ARMs are biting them. Link to comment Share on other sites More sharing options...
zoony Posted October 27, 2006 Share Posted October 27, 2006 If I was going to buy, I'd wait another 6 months. Wait till full-fledged panic sets in. Link to comment Share on other sites More sharing options...
Larry Posted October 27, 2006 Share Posted October 27, 2006 There are lots and lots of people who interest only or 3 year ARMs are biting them. You mean, people who bought houses on the "make no payments for the first year" plan, and who made up their budgets on the assumption that interest rates would stay at record lows, might have over-estimated their ability to pay? I'm shocked. Link to comment Share on other sites More sharing options...
zoony Posted October 27, 2006 Share Posted October 27, 2006 You mean, people who bought houses on the "make no payments for the first year" plan, and who made up their budgets on the assumption that interest rates would stay at record lows, might have over-estimated their ability to pay? I'm shocked. :laugh: When we bought a year ago in August... the loan officer tried every way in the world to push that interest-only nonsense. We said no, and got a very boring fixed rate. He just couldn't understand why we would do that. ... Link to comment Share on other sites More sharing options...
PleaseBlitz Posted October 27, 2006 Share Posted October 27, 2006 You mean, people who bought houses on the "make no payments for the first year" plan, and who made up their budgets on the assumption that interest rates would stay at record lows, might have over-estimated their ability to pay? I'm shocked. Im a mortgage banker and ive never heard of a "make no payments for the first year" plan. :whoknows: Interest only loans remain an outstanding idea IF you know what you are getting into. ARMs are dumb unless you KNOW you are selling before the fixed rate term expires. Link to comment Share on other sites More sharing options...
PleaseBlitz Posted October 27, 2006 Share Posted October 27, 2006 :laugh:When we bought a year ago in August... the loan officer tried every way in the world to push that interest-only nonsense. We said no, and got a very boring fixed rate. He just couldn't understand why we would do that. ... Gotta agree with the LO on this one zoon. Link to comment Share on other sites More sharing options...
zoony Posted October 27, 2006 Share Posted October 27, 2006 Gotta agree with the LO on this one zoon. :nutkick: What do you know... you act like you're in the industry or something ..... Link to comment Share on other sites More sharing options...
PleaseBlitz Posted October 27, 2006 Share Posted October 27, 2006 :nutkick:What do you know... you act like you're in the industry or something ..... Sorry, i just get mad sometimes b/c the I/O programs have a bad rep, but they really are the way to go for a LOT of people. :flowers: Link to comment Share on other sites More sharing options...
zoony Posted October 27, 2006 Share Posted October 27, 2006 Sorry, i just get mad sometimes b/c the I/O programs have a bad rep, but they really are the way to go for a LOT of people. :flowers: Tell you what, I'll make it up to you. How about I take you and the I/O loan out for a nice dinner. Wherever you and the I/O want to go. :grouphug: Link to comment Share on other sites More sharing options...
chomerics Posted October 27, 2006 Share Posted October 27, 2006 And the weasel goes P-O-P!!!! yes, the market is on its way down, no question about it. There will be about 4-5 years of blood letting IMO, because there are way WAY to many people out there with ARMS who got screwed. Remember 3 years ago when Greenspan RECOMMENDED that people take ARMS??? WTF??? That had to be the single most absurd statement ever to come from the fed chair I can remember. In Boston, homes are on the market for on average 4-6mo, and the prices keep dropping. They will drop until the bottom hits, and that is not going to be for a while. Meanwhile, the credit card companies are increasing interest rates on people up to 30%, and everyone is living beyond their means. This is the first time since the great depression that Americans are living on credit, and spending more then they make. One thing is for sure, the next few years are going to be very telling. Link to comment Share on other sites More sharing options...
PleaseBlitz Posted October 27, 2006 Share Posted October 27, 2006 Tell you what, I'll make it up to you. How about I take you and the I/O loan out for a nice dinner. Wherever you and the I/O want to go. :grouphug: Im all set. I have my own right now. And some extra scratch every month to go out to dinner if i want to. Link to comment Share on other sites More sharing options...
DCsportsfan53 Posted October 27, 2006 Share Posted October 27, 2006 Sorry, i just get mad sometimes b/c the I/O programs have a bad rep, but they really are the way to go for a LOT of people. :flowers: It's the 5 year pay option ARMs that really get people in trouble. You can pay your interest only or pay extra and pay down the principle. Your choice. Uniformed or dirty LOs will fail to inform them that when those 5 years are up, if they've only been paying the minimum they're in for a HUGE surprise when their payment more than doubles. It's easy to get upside down in one of those if you don't plan well and, for many people, paying beyond the minimum is easy to think you'll do but then doesn't happen. Link to comment Share on other sites More sharing options...
Midnight Judges Posted October 27, 2006 Share Posted October 27, 2006 I've been looking at houses and I'm just licking my chops about how much these things are going to go down in price. Many owners have dropped their price by 50 to 150 thousand already and they still haven't sold. Perfectly nice houses too. Seems people are getting their appraised value, if that, whereas two years ago you could get way more. The Loudon county homes seem to be selling the slowest because the owners there refuse to acknowledge the fact that their real estate is not as desirable as Faifax county. This might not be a pop in this area because the job market is good but it certainly is a significant adjustment. Link to comment Share on other sites More sharing options...
GoCommiesGo Posted October 27, 2006 Share Posted October 27, 2006 I've seen this in Annapolis as well. Houses are on the market 4-6 months people are dropping their prices. Their are a couple of houses in the same development that have price differences up to 40k. Same style, almost the same square footage. I'm going to look at a few this afternoon and I can't wait. Link to comment Share on other sites More sharing options...
PleaseBlitz Posted October 27, 2006 Share Posted October 27, 2006 It's the 5 year pay option ARMs that really get people in trouble. You can pay your interest only or pay extra and pay down the principle. Your choice. Uniformed or dirty LOs will fail to inform them that when those 5 years are up, if they've only been paying the minimum they're in for a HUGE surprise when their payment more than doubles. It's easy to get upside down in one of those if you don't plan well and, for many people, paying beyond the minimum is easy to think you'll do but then doesn't happen. Most of the I/O loans that i am familiar with are set up like this: The first 10 years are an interest only "option" meaning for the first 10 years you can pay the interest only payment, or any amount above that, with the extra going to principal. I agree that in a declining market it is easy to get upside down in if you dont plan well, but even on P&I loans, for the first 5 years 90% or more of you payment is going to interest anyways, so its easy to get upside down on one of those too. After the 10 years are up, IF you are still in the house, your payment would likely increase dramatically, but guess what? Refinance it. Meanwhile, here is what paying principal does for you: It locks your money away until you sell your house and earns you a 0% rate of return. What would you say to a financial advisor that told you to put your money into something that wasnt liquid AND had no growth? You'd be much better off taking the I/O option and putting your money in an ING account or god forbid investing in some mutual funds. Link to comment Share on other sites More sharing options...
RyansRangers Posted October 27, 2006 Share Posted October 27, 2006 I am seeing a pretty good surge in the refi market right now people refinancing out of option arms and i/o's. However, especially in Mass prices are declining so fast that the LTV on the home is making the rate higher and combine that with the fact they have paid no principle off its making these refi's expensive for the customer. The problem with these "EXOTIC" mortgages is the incentives for brokers to push them such as the 50 year loan and the POA. Connecticut has not suffered that much in home values but Mass has.. People are refi'ing and there homes value is 30k less than last year Link to comment Share on other sites More sharing options...
Cskin Posted October 27, 2006 Share Posted October 27, 2006 Here in Richmond we're seeing a correction... but we're not seeing the steep decline or "pop" others are seeing. Additionally.... this isn't a bad market.... just a normal market... which Richmond hasn't seen in the last three or four years. Now, if you want your house to sell... it has to have three very important factors. Location, Condition, and Price. Additionally, if you're selling your home... you have to place your home in the 1st or 2nd position in terms of price... which is often 3-5% less than market... in order to sell. Those who aren't being greedy or realize they aren't selling their home in last summer's market are getting offers and getting their house under contract for fair prices. Those who are demanding they get what their neighbors received last year are biting their finger nails, wondering why they aren't getting any showings, and spending the weekend sitting in a corner flicking a reading light on and off and contemplating boiling their pets. Link to comment Share on other sites More sharing options...
Larry Posted October 27, 2006 Share Posted October 27, 2006 Interest only loans remain an outstanding idea IF you know what you are getting into. I've tried to think of a hypothetical situation in which interest only is a good idea. The only way I can see it not being stupid are people who expect to flip the property, soon, (and therefore, if they'd done a traditional mortgage, they wouldn't have paid much principal, anyway), and people who are expecting to actually pay more than the official payment amount. Examples of the latter are people who intend to make interest-only house payments while paying off their credit cards, or people who's income fluctuates, like commissioned salesmen, who intend to make voluntary principal payments in Good Months, but pay interest-only in bad months. Link to comment Share on other sites More sharing options...
PleaseBlitz Posted October 27, 2006 Share Posted October 27, 2006 I've tried to think of a hypothetical situation in which interest only is a good idea. The only way I can see it not being stupid are people who expect to flip the property, soon, (and therefore, if they'd done a traditional mortgage, they wouldn't have paid much principal, anyway), and people who are expecting to actually pay more than the official payment amount. Examples of the latter are people who intend to make interest-only house payments while paying off their credit cards, or people who's income fluctuates, like commissioned salesmen, who intend to make voluntary principal payments in Good Months, but pay interest-only in bad months. Here is an example: Someone that plans on living in the property for less than 10 years and knows somewhere they can invest the money they save by not paying principal at a return greater than 0%. Link to comment Share on other sites More sharing options...
DCsportsfan53 Posted October 27, 2006 Share Posted October 27, 2006 Most of the I/O loans that i am familiar with are set up like this:The first 10 years are an interest only "option" meaning for the first 10 years you can pay the interest only payment, or any amount above that, with the extra going to principal. I agree that in a declining market it is easy to get upside down in if you dont plan well, but even on P&I loans, for the first 5 years 90% or more of you payment is going to interest anyways, so its easy to get upside down on one of those too. After the 10 years are up, IF you are still in the house, your payment would likely increase dramatically, but guess what? Refinance it. Meanwhile, here is what paying principal does for you: It locks your money away until you sell your house and earns you a 0% rate of return. What would you say to a financial advisor that told you to put your money into something that wasnt liquid AND had no growth? You'd be much better off taking the I/O option and putting your money in an ING account or god forbid investing in some mutual funds. Yeah, I know that's the case IN PRINCIPLE. The problem, most Americans will take the extra money and go out to dinner, buy a Benz, ect. The pay option arms take a good deal of foresight and discipline on the part of the home buyer and a lot of them end up in trouble. Link to comment Share on other sites More sharing options...
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