Will ‘Non-Bubble’ Areas Suffer The Most?
Readers suggested lesser known housing markets as a bubble topic. “Possibility that the areas that will suffer the most during the pop are the areas everyone thinks there are no bubbles. In the U.S., areas like the rust belt and portions of the Midwest where fundamentals (jobs, population & real wages declining) dictate prices should have been declining, have been appreciating at a good clip due to outside speculators seeing their ‘cheap’ real estate as a gold mine.”
“When the speculators have to dump these lower priced properties to service their debt on the more prized/higher priced (read: bubbly) investment properties, it is going to crush those markets.”
Another said, “I get very amused listening to the BS about Texas being ‘undervalued.’ That’s quite interesting considering the unbelieveably high foreclosure rate. We’ll see how ‘undervalued’ it is when the rdistress sales start en masse.”
And another, “Those who think that there’s been no bubble in areas where prices haven’t risen much seem never to have considered the possibility that sans bubble they’d have fallen.”
From Fort Wayne Indiana, “To look at all the formerly vacant fields around Fort Wayne sprouting new houses, it seems unlikely that the area’s home construction companies would be going through a bit of a rough patch. But that’s the word from Fort Wayne home builders.”
“‘They left four or five homes undone,’ Dave Fuller, commissioner of the Allen County Building Department says. ‘Everybody we’ve talked to has been unsuccessful reaching them.’ Last week, a number listed for the company in Lafayette had been disconnected, and no forwarding number had been left. Fuller says unfinished homes apparently were owned by the builder, not individual buyers.”
“Excess inventory with some builders is worrisome, (builder) Lonnie Norris says. ‘I went on the MLS, and you see this guy or that guy who has 40 homes sitting, and that’s scary,’ he says. ‘It’s a little scary from a spec point of view.’”
The Toledo Blade. “The din of construction hammers faded and thousands of homes went unsold in northwest Ohio and southeast Michigan in the first half of 2006. ‘It’s tough,’ said real estate broker Jim Loss. ‘It’s all about price now,’ he added. ‘You have a small number of buyers and they have a lot to choose from.’”
“After buying the four-bedroom house two years ago for $170,000, Jim Soden invested $25,000 in improvements including landscaping and granite countertops. He said he will take a loss if he receives his asking price. ‘This market is bad,’ said Soden.”
The Journal Sentinel in Wisconsin. “Something popped right over Geoff Hogan’s longtime Oconomowoc home recently. He suspects it was a housing bubble. Maybe it was just a mini-bubble that burst in Hogan’s long-booming Waukesha County suburb of 13,000, but it has been dramatic. House hunters disappeared and the streets were peppered with ‘for sale’ signs.”
“‘There are 200 homes for sale here now - 200! Waukesha County has 3,000 for sale. Somebody asks, ‘Can you show me some homes?’ and they get a list big enough to choke a horse,’ Hogan said. He and his wife had already downsized to a second house, (and) knew what they had to do. They reduced their price. Asking price for the Hogan family homestead, a 3,500-square-foot ranch on 4.5 acres, is now $789,000, down from $899,000.”
“‘Our market has never suffered the highs and lows that the coasts suffer. We may flatten out for a while, but that’s all,’ industry veteran Kathy Mitchell said. ‘The problem is, sellers are still expecting everything to happen quickly. If it doesn’t happen in the first 30 days, they reduce the price. Well, buyers are watching for that.’”
“Some builders are saddled with ’spec homes,’ built on speculation of buyer interest that hasn’t materialized. They’re now advertising freebies to lure shoppers. ‘The middle tier, the $400,000 to $700,000 range, is spotty,’ said (bulders) association president Pete Feichtmeier. ‘There’s been a lot of product in that tier, an oversupply to some degree.’”
The Idaho Statesman. “So far this year, 19.5 percent of home loans in the area were taken out by outside investors. Investors accounted for 21 percent of all home loans in 2005; up from 11.4 percent in 2004 and 8 percent in 2003. ‘Mainly, it hit in the entry level housing market, and it really kicked in May of last year, and exploded to the end of 2005,’ said local Realtor and developer Chris Findlay.”
“Findlay said the market for investors looking to ‘flip’ properties is cooling off as prices level. ‘There is going to be a little softness. But we are not going to have this giant bubble. That’s not going to happen, real estate doesn’t work that way,’ Findlay said. ‘The Boise market is still one of the best markets in the United States.’”
A difference between bubble and non-bubble areas is that the foreclosure rate in non-bubble areas remained high over the last few years. However, in bubble areas, you have many people who used their HELOCs and cash-out refinancing to remain afloat. Futhermore, the share of interest-only and option arms are much higher in the bubble areas.
While I think that the non-bubble areas will stagnate or fall, the bubble areas probably have a flood a foreclosures coming down the pipe.
Another difference is that nobody really wants to live in “non-bubble” areas (e.g., Bakersfield) and they are only buying there because of the gargantuan wave of liberated equity which has steamrolled inland markets with investment purchases. Transient investment demand has driven up prices and, on the downside, the withdrawal of liberated equity will restore prices to a level which reflects fundamental demand, or the absence thereof.
Thus I believe the deserts (PHX), tundras (Fargo), and other areas where noone actually wants to live have farther to fall. When the bubble deflates, so will demand (and prices) in places where nobody would actually care to live.
‘There is going to be a little softness. But we are not going to have this giant bubble. That’s not going to happen, real estate doesn’t work that way,’ Findlay said. ‘The Boise market is still one of the best markets in the United States.’”
I guess if you say this stupid stuff often enough you may start to believe it. The pain of this crash is going to catch many off guard. That is because they have their heads in their rear-ends and are really enjoying the view.
Obviously, Findlay hopes there are more speculators somewhere
With the already high foreclosure rate in Texas, remove any outside investers from California & where ever drawn in by the stories of Texas being ‘undervalued’ and I see a repeat of the late 80’s.
I don’t see many foreclosures in my area of DFW even though appreciation rate has been only at around 5-10%. Actually, the inventory has been stable for last year even though there don’t seem to be many outside investors ( don’t see many for rent signs, haven’t seen one in a long while in my neighbourhood). The foreclosures might be more confined to the outside suburbs where there is endless land to build.
We’ll see about that. By the time the last bubble finally unwound, there were as many foreclosures in Highland Park as in Plano.
Where is “your area of DFW?”
I am in the valley ranch area, zip code 75063
9 foreclosures, 3 preforeclosures in your zip code 75063
Saint James Road, Elhorn Path, Los Alamos Tr, Ginko Cir, Richmod, Pedernales, 2xx0 Pistachio Dr (bank owned, $389K) , Lakecrest
Old Oak Dr, Windy Hollow Dr, Southridge Way,
Collin county & north Ft Worth among others.
The factor that nobody has mentioned with regard to TX is the role of home equity lending in this bubble. In the last one which finally bottomed in about 1994, there was no home equity lending allowed in Texas. That only began in 1998. I would venture that the penetration of this type of lending into existing Texas home equity has reached over 60% since it was allowed by the Texas legislature. So, you don’t have the large group of people who have long standing “equity” in their houses protected against price erosion. I think it will get uglier in Texas than anyone would ever believe.
I don’t know how accurate this survey is, but I think your 60% figure is pretty far out there, unless I misunderstand you. From this study, it sounds as if most of the equity loans were used to pay off credit card debt or make home improvements.
This Finance Commission study focuses on home equity lending. The study was performed by Analytica, Inc., a Houston-based marketing research firm. The report presents findings based upon a survey of 1200 Texas homeowners and 91 home equity lenders.
The survey estimates that 10.4% of Texas homeowners have applied for a home equity loan and 8.9% of Texas homeowners have actually obtained a home equity loan. The overwhelming uses for home equity loans were to pay off credit card or other debt or for home improvement purposes. The report identifies several ways in which homeowners and lenders believe that home equity lending could be improved.
http://www.fc.state.tx.us/Home%20Equity/heindex.htm
This page also puts Texas at less than 10% in 2001, well below the national average of 14.5% and claims Texas was close to the saturation point at that time:
http://www.window.state.tx.us/specialrpt/homeeqty03/
“From this study, it sounds as if most of the equity loans were used to pay off credit card debt or make home improvements.”
I would bet that the majority of folks who paid off their credit card debt with an equitly load proceeded to add more credit card debt almost immediately afterward.
I was down in the Turtle Creek area last night and it has really gotten crowded. A friend used to live in one of the only high rises in the area. Now I see high rises going up left and right. It isn’t as charming a locale it once was - you feel like you’re in a herd walking around.
If DFW sees declines, they are as likely to effect the city as the suburbs, since prices have risen more dramatically in the city and inventory has gone up despite a decline in population growth. They keep building in the city - tearing down SFH’s and replacing them with condo complexes, even though the population trend continues to be exodus from Dallas county into Collin and Denton.
Still, I can’t envision a crisis in non-bubble areas of the magnitude bubble cities face. ARM and I/O loans still account for a relatively small piece of the home loan pie in non-bubble states compared to 2/3rds of the pie out West. Median prices are still a small multiple of our median incomes, not the double digit multiple some bubble areas have. A 20% or even 30% decline would have less of an economic impact in a non-bubble region than the same percent decline in an area with significantly higher prices and comparable median incomes. It’s the difference between a loss in the tens of thousands and a loss in the hundreds of thousands. Even if it was all just on paper, the larger real dollar decline is going to effect spending patterns more substantially.
The factor that is going to sting nationwide is the eventual tightening of credit / mortgage standards. Places with minimal bubbliness have nonetheless “benefited” from loose credit (mainly from first time buyers, people with no down payments, etc. who buy homes that otherwise they couldn’t afford). The interesting question: if “flyover country” saw negligible price increases with loose lending, why wouldn’t it also witness price drops with credit tightening? All of this makes me think that if lending standards hadn’t been so loose these past few years we would’ve already witnessed price drops in non-bubbly areas.
Percentagewise and in absolute terms, though, the coasts will almost certainly take the biggest plunge. We’re talking about a magnitude of speculation that has never been witnessed in human history. Around Boston I meet so many people who are leveraged to the gills, and from I hear it’s a lot worse in California. I see deflation ahead, EVERYWHERE, and in a big way.
Deflation would be a good thing for us savers.
My MILs housekeeper who she is good friends with and often takes to lunch worked a lot over the years in the town we live in. She recently commented on how highly leveraged many are that live here.
Housing may be relatively cheaper in this flyover town but the “Keep up with the Joneses” mentality runs deep. The home is nothing. You need to keep a high end vehicle under 2 years old or people will talk. Your child must be in every sport even if conflicting schedules means he can’t show for 1/2 the games, carrying an I-pod and his own cell phone by 3rd grade. Said child has ATVs, a heated inground pool, several Game Boys and Play Station 3, enjoys learning golf & tennis down at the club, and might even show up for school photos in his very own tux. Then there are the acceptable clothing needs for the well dressed CNY woman. Don’t forget the spa and tennis outfits!
IMHO we’ll fall like the rest.
Sorry for the rant…my point was I believe that pockets here are as empty as in the bubble zones. When things go upside down the locals will be as unprepared as anybody.
I’ll espouse my theory once again: Non-bubble areas have been suffering the most so far because they haven’t had the protection increasing home prices have afforded peole in bubble areas against an otherwise weakining economy and stagnant wages. Rising home values, in effect, acts as additional income protecting homeowners in bubble areas from forecolsure.
This will now all change, as prices rapidly fall in bubble areas, in effect, acting as negative income. Bubble zones will now feel the pain that other areas have already begun to feel, only more intensely.
The saving grace in the non-bubble areas is that there is not such a disconnect between rents and prices. They are already much closer to the “price floor” or intrinsic value of their homes.
I still think it will be painful for everyone if we experience stagflation or even a mild depression.
Good point! Home rents are higher in my Michigan area than rents in Phoenix. Yet Michigan home prices seem to be about half that of Phoenix (comparable land and sf).
How many homes sales in the US are owner-occupied or primary residences? Once you know that the rest of the equation starts to reveal itself.
It’s high time for the RE speculators(50% of recent buyers) to take one for the team. These low IQ over-zealous idiots will get a pole shoved up their brown rounds before this Poseidon adventure is over. I have zero sympathy for the flippers. I mean Zero. They can smoke a turd in hell for all I care. It’s a game of chance, and they lost. Bye-bye now.
Tell us how you really feel. lol
$700k+ for a home in Waukesha?!?! Try reducing it to $370k, the real value.
Yep, I’m just outside of Occonomowoc, no doubt, inventory all over the place. So let’s see, we need what, $190K/yr jobs for those?…nope, no bubble here in WI. lol
Thanks for the local input.
from another MilwJS article: “During about the same period (2000 to 2004), the city’s median household income fell from $32,216 to $31,231, according to U.S. census figures adjusted for inflation. The metro area’s median household income, as measured by the U.S. Department of Housing and Urban Development, has been the same since 2002. “The runup in prices is so out of balance to incomes that this gap may not be closed for years,” said Conrad Egan, president and CEO of the National Housing Conference in Washington, D.C. Ray Schmidt, executive director of Select Milwaukee Inc., a non-profit group that promotes city homeownership, said, “If you had told us five years ago that median price would surpass $120,000 now, we’d have said, ‘It’s impossible.’ ”
from weblog Housing tracker:
07/14/2006 Median: $204,900
That’s what I thought when I saw that number. Does nobody think over $300k is way too much for a house anymore?
300k would be HEAVEN in LA!
Oh, I don’t know. $300k in my neighborhood is considered pretty close to a conforming downpayment. We were talking downpayments right? Right?
Hehe. You know, I’ve been living with this for several years now, and I still have not internalized the fact that people will pay $1 million plus for a 2-bedroom apartment. It still boggles me, much like actually trying to visualize a million of anything. I can only imagine how difficult it must be for folks in the midwest to wrap their heads around how truely insane things are here in bubbleville.
Given the numbers we’re used to dealing with in Coastal California, it’s just plain impossible to fathom how folks can be in foreclosure in CO & TX. Come on — their mortgage payments are considered a car payment here!
I do. I would rather not own a house than pay too much and have every other part of my life constricted to pay for it.
A normal house, yes over 300K is too much. However once growth control goes into effect there is no normal. I think that growth control shortage started the boom and home owners on the coast became speculators and took out home equity and bought where new homes can be built from horizon to hozizon, like Phoenix.
Then it was a big snowball rolling down hill. Many many times I have had people and realitors tell me they were taking equity out of there homes on the coast and buying in the Phoenix area to flip or rent. I remeber one guy buying two homes in Gilbert from his mothers home equity in San Jose, for retirement planning. That must have been around 2003.
Now I’m wondering if the phoenix market crash can take down the original position on the cali coast? that would be interesting.
I doubt we will ever see a median below $360K nominal in SD again. But that figure is a good deal below the recent median price level, and I expect the median to bottom out in that neighborhood (at around 6 times median income) before the correction is over and done with.
360k? Come on, Stucoo, didn’t we have that like two years ago? Also, isn’t our median income in the low 50’s? 50*6 is 300k, no? I’ll make you a gentleman’s bet (I don’t give a crud if you win - I got a hefeweizen in me). The median price of a home in San Diego (new, used, condo, everything) dips below 250k by Dec. 2007. I know, I know, that’s awefully wishful thinking - but, like I said, the hefeweisen is king.
You win, I owe you one buck. I win, you buy me a bloomin onion at Outback Steakhouse (Ted Williams and Pomerado). Not quite even money, but you gotta give me odds, no?
Sounds like a win-win to me. Deal.
Cool beans! I’m gonna check back with both of you next December. I’ve made a note of this on my “bubble spreadsheet”.
BayQT~
Do you guys rent in Poway, too?
We Rent!,
I’m with you. Prices will definitely overcorrect to the downside. Enjoy your bloomin onion!
Powayseller: next door in RB
tj: wanna get in on this? 50/50 even steven on the profits/loss
Count me in!
300k is more like it by the end of 2007. i live in a house which is pretty much always within 3% of the median price here in SD for a long time. it hit a value of 250K around 2000. considering inflation of income I think that is the actual long term value of the house today (a neighbor of comparable house was recently sold for 500K after a series of price reduction from a delusional price of 600K+ over several months). i’d like to think of that as the bottom (adjust for inflation accordingly)
In my opinion, in order to afford a 300k house, the buyer(s) should be grossing at least 100k. I have a friend who purchased a $390k home in 2002. He and his wife make around 110k between the two of them, have 3 kids, and they are strapped. They have one car payment (suv of course) but after all the bills, there is not much left over if any. Credit cards get used at times and their debt is high. He is contemplating selling. Now, considering they make much more than the median income, and their house sits around the median price in their city, how in the world can average wage earners realistically afford these prices? They cannot. I don’t care what anyone says, $300k is still a lot of cash in my world. To see these 60’s style ranch homes selling for a million nowadays is laughable. I still see a $200k house when I look at them. I guess I am an old soul in my mid 30’s.
“I don’t care what anyone says, $300k is still a lot of cash in my world.”
————————–
Agree with that. $100K income earners would be able to afford a $350K house. That isn’t taking cost inflation / wage stagnation-deflation into account.
GS,
I believe We Rent is going to win this one. The only doubt I have is the timing. IMHO, we will see $200K to $250K medians in SD by the time this thing hits bottom. Only thing is it might take quite a few years to get there.
I’m seeing a lot more SFH at entry prices(600-750K )in LA. I think entry level buyers can no longer afford to get into the market or have left.(tightening lending???) LA people don’t like to downsize…they like to climb that property ladder…so the bottom may fall out causing a sharp shift down in prices on the low end. This will crash the condo market. After that….who knows?
600-750K is what you call entry prices? When condos are selling for 60-70K, that’s entry prices.
Yes, presently, that is what the enrty price is…for SFH.I’m talking Sherman Oaks area. Hopefully, we’ll have a half price sale in about 3 years!
I’m seeing a lot more SFH at entry prices(600-750K )in LA.
Kinda describes the insanity here in a nutshell, eh?
Just found this:
‘FARGO, N.D. - Rising home prices have outpaced household incomes in the Fargo-Moorhead area the past six years, a consultant says. The local Workforce Housing Coalition found that from 2000 to 2005, average sale prices rose 42 percent for existing homes, 31 percent for new single-family homes and 22 percent for new twin homes. During the same time, the metro area’s median income increased 23 percent, from $38,113 to $47,044.’
‘Karlye and Matt Retzer thought they would get more house for their money when they moved back to Moorhead, Minn., from Las Vegas a year ago. The couple, both elementary school teachers, gave up the 2,200-square-foot home they rented in a gated golf course community and took significant pay cuts to be closer to family. But the Fargo-Moorhead housing market was not what they expected. ‘We just didn’t think it would be this difficult to afford a house,’ Karlye Retzer said.’
What ! Fargo N.D. At least income went up 23% . That’s it ,the bubble leeched into every area ,it’s hopeless .
I guess everyone wants to live in Fargo, ND?
You don’t understand. It’s different here. heh.
I do understand. I saw the movie
Somewhat OT, but I just finished a long conversation with an agent from a large national homebuilder at a model home in the Tampa, FL area. I told him I’m looking but not going to buy for some time, and that I’m renting, etc. Of course he wanted to know why. I explained that I felt prices would be coming down, why own a depreciating asset, etc. He said he understood but felt prices won’t come down, at least not much. So I asked him a really tough question. “Why? Why do you think that”” He paused for a moment and responded, “Well, I’m not sure”. I gave him a moment as he stammered out some answer about how the market will normalize or something, and then I said “let me tell you why I think prices will go down”, and I proceeded to explain everything from ARMS resetting to total lack of affordability, among other things we discuss here. He totally agreed with me when I was done (I was watching my BS detector to see if he was humoring me-he was not…at least at that point when he knew I wasn’t the everyday GF). He knows he is barely selling what he needs to stay afloat now, after selling 10-20 homes during some month last year. He then started telling me about how he knew so many of those people were lying about the homes being for themselves and not for investment (I’m buying it for my brother, etc.). They have to own the home for 2 years before they sell it. He said he knows for certain that many of them are trying and will try to sell the house this year in violation of the agreement. I asked how do they enforce this policy and he said they don’t have to. They “clouded” the title so that when they try to sell they will not be legally able to! I had not seen that term on this board so forgive me if it is common knowledge, but there goes another class of folks who may get really screwed! I knew about the agreements but figured it wouldn’t be enforced. He said he is certain that many of them didn’t know this, after all, who reads the contracts. He also agreed that there was no way a lot of the buyers could afford the houses in the long run.
Clouding the title… ohhh that’s sneaky. I’m gonna remember that one if I ever private place a mortgage in a sale.
The ways to do this are pretty simple. Something as idiotic as a $1 mechanics lien. Something about subsurface rights held in trust for two years before vesting. An expiring rights-of-way clause would work. Maybe even a poison pill like a huge sewer bond option with an option period that expires after two years.
Thanks for all the good ideas mr. unknown salesman.
Very interesting. That’s a new one on me.
When you think about it, this whole bubble is in a cloud.
Thanks.
HA HA HA HA HA HA HA HA HA HA HAHA HAHA HAHAHAHAHAH Cloud on title ….HAHAHAHAHAHAHAHAHA…Cloud on title …..
HAHAHAHAHAHAHAHAH..
Do attorneys represent buyers at closings in Florida? If so, I see a whole slew of malpo suits against lawyers if these clouds on title weren’t disclosed. They are probably (hopefully) on the title policies, but your average buyer wouldn’t know what those are, much less know how to read them.
A cloud like that deserves a extra disclosure . Usually people review the prior title report ,(on a new house there wouldn’t be much of a chain of owners ). The new title policy comes after the house closes escrow .
I understand that. But people hire real estate attorneys to tell them the kind of exceptions that are on title commitments. Most people buying a house wouldn’t know what a title commitment is or be able to understand it. If attorneys represent buyers at closings, the the attorney should disclose that to the client. If the attorney doesn’t disclose, they he or she may be liable to the client. Real estate attorneys have the second highest rate of malpractice claims after PI attorneys.
Yea, but if those attorneys operate like escrow officers out here. They have in big bold letters they are not parties to the deal. It is up to the buyer to know what they are signing.
It doesn’t matter if the attorney is a party to the deal. He or she has a fiduciary duty to the client.
They only have a fiduciary duty to the buyer if the buyer hires them. If there is no written agreement to represent the buyer, no ficuciary duty - just like title insurance, the buyer has to pay extra if they want to be protected along with the lender.
In the state I live in buyers and sellers hire their own attorneys separate from the attorney that may represent the title company or the lender. That is the attorney that has a fiduciary duty to his or her client and may suffer a malpractice claim if he or she doesn’t disclose to the buyer that the developer has clouded the title. That’s why I was wondering if buyers secure their own representation in Florida. I know that in a lot of states people rely on real estate agents and escrow companies to “represent” them in home purchases and sales.
Lawyers suing other lawyers? Could it get any better??
In many Florida residential real estate transactions there are no attorneys involved. Buyers and sellers use boilerplate contracts from the Florida Assn of Realtors, and a title company handles the paperwork.
I’ll bet a foreclosure would serve as a fogcutter
I would be really interested to hear how this “clouding” was actually done, if anyone has first-hand knowledge…
You can have a straight-up agreement recorded that gives any profits from a future sale (during the covered period) to the builder, or allows the builder to buy the house back if such a sale is even attempted. Here’s one in AZ:
http://tinyurl.com/oojhh
Wow….this clouding issue is getting very, very interesting. I can see it now…a few readers dashing to their file box in the closet to read over their mortgage agreements. Hmmmm….memorandum of agreement, memorandum of…oops, here it is.
The fun continues.
I am totally not in this boat but I’d be interested in seeing more info on this subject. It is definitely something that future buyers should be looking out for. I also believe that people who have been participating/reading blogs like this will be more thoroughly reading through docs in the future…no matter how much time it takes. Better to take the time than to get punched in the stomach later.
BayQT~
I think you politely left out a few words there, QT.
“. . . a few readers feeling like they just sat on a foot long icicle then dashing to their file box in the closet . . .”
Finally! The bubble exists nationwide because low interest rates, loose credit standards, and HELOCS exist nationwide. (Not to mention investors. Not even close to the same extent, but still…)
Example: Rock Island, IL (Squarely in the Midwest.)
-Has had net population loss for 2005, and is facing BRAC job loss.
-IL real wages adjusted for inflation have DECREASED 12% in the last 10 years.
-Largest inventory this last winter since 1989.
-And yet! This amazing little town saw a double digit rise in appreciation last year. I even heard a friend say her parents were thinking of getting into real estate investment. (Her dad’s an accountant.) Realtor’s say it’s not a bubble there because THEY are different. They aren’t on the coasts. Pay no attention to the 11 mo. of new housing on the market. And the 15mo. of condos!
Example: Longview, TX
-Lots of new construction.
-Double digit appreciation.
-Flippers (buy it cheap, fix it up a little, sell for a lot more).
-But not a ton of new industry. (Lots of service jobs though!)
But THEY are different. They aren’t on the coasts. And in relation to the rest of the country they are very cheap! (I personally know someone who credit carded and home-improved herself into a second mortgage, then sold for even more to “move up” - all in 2-3 years.)
It can’t last. And HELOC’s are everywhere, not just the coasts.
Can one of you financial smartypants please explain the “clouded” title? In small words and short sentences?
A “clear” title shows without a break or exception who owns or ever did own a piece of property. This is not as simple as it may seem at first. A death without a will, a fire in the old courthouse, remarriages and then there are things like divided mineral rights and aviation easements, surface access restrictions. Don’t even try to decode water rights. A “clouded” title has something amiss in the unbroken history or an unresolved attachment against the current owner. If you don’t pay for your new roof the roofer will file a mechanics lien against the property for instance. You cannot sell a clouded title and it is a difficult process to clean one up without everyone involved cooperating.
Can you even re-finance a property with clouded title?
Why would a lender touch something like this?
Sm landlord …..The condition is you can’t resell ,it doesn’t say anything about re-finance . If I was a lender and I saw this on title I might shy away from the deal because it’s a limitation that might limit the borrower/lender to much .
Clout on title ……its like a lein on the the property , a condition in this case . The condition or restriction is… home cannot be resold for 2 years . This restriction would show up as soon as you ran a title report on the property .Its recorded.
I once heard that if someone loses a house for non-payment, it is possible to put a lien on it for the amount of principle paid in.
Interesting . I would think that would only be valid if the lender sold the property in excess of all loans and all costs of foreclosure sale .
And it is like being hit upide the head! (clout)
After I wrote my rant above, I realized the bottom line is that it is not just a housing bubble, it’s a credit bubble and that’s why it won’t be any different here.
Oh, I see. Thanks for explaining!
Report from Jefferson City, Missouri (Central MO)…
Houses appreciated a lot from 2000-2005. Parents sold a home for $82,000 in 1996; neighboring home (same one) on the market for $149,900 in summer 2005.
There are no reasons that home prices should be rising any faster than the rate of inflation. The area isn’t growing that fast but it is a great community.
Springfield, MO - long known for lack of home price appreciation has exprienced 9-11% growth each year from 2002-2005.
Same story for other towns such as Cape Girardeau.
St. Louis - ranked as 16% overvalued by CNN Money earlier this year. I’m guessing it’s more like 30%. Houses took off in 2000 with no apparent reason. The area has net population loss every year, has never fully recovered from the dot-bomb bust, and has lost some major employers the past few years (TWA Airlines, Ford Hazelwood factory).
Flyover country is in no way immune. It might get hurt worse because we know the demand will be back someday along the coasts. Demand is perpetually diminshing in the midwest.
Moman — did you used to work for Citi?
No. You?
Overvalued or undervalued, I really doubt that any statistically significant # of markets exist without “microbubbles” - preferred school districts, often incorporated towns outside the grasp of annex-hungry larger cities. I’d expect these can bid up quite a bit without making too much of a dent in the overall “picture” of a region.
as usual, my view from Europe on this issue:
I recently found a spreadsheet (from semi-government office) with median Dutch home prices over the last 13 years. The interesting thing is that they have records for the different areas (provinces) of the country and the different types of homes. All prices are indexed relative to the average value in a certain year (1995 if I remember correctly) so you can see in a glance how prices are developing.
The Dutch bubble started about 15 years ago in the big metropolitan areas; it took 5-10 years to spread to the outer areas of the country despite the fact that the Netherlands is a tiny country. By the time prices in the outer areas were surging, prices in the bubble centre had already started to decline for some types of home.
It is evident from the numbers that the biggest price increases by percentage are in the outer areas of the country, which are the areas which originally had the cheapest homes (because of low income, remote location etc.). Over the years the ‘undervaluation’ in the outer areas was removed by the bubble and now the price levels are nearly the same all over the country, despite the fact that income levels etc. still have huge differences.
It remains to be seen if the outer areas will also get the biggest declines (by %) when the bubble bursts; the national average is still increasing slightly here.