‘A Dramatic Slowdown’ In Massachusetts
The Massachusetts realtors have the July numbers out. “The state’s real estate is experiencing a dramatic slowdown. Single-family house sales in July slumped 25.3 percent, while house prices declined 3.5 percent, the Massachusetts Association of Realtors said today.”
“The condominium market began its downturn earlier but sales slumped dramatically last month: Condo sales fell 21.4 percent, pushing the median condo price down by 4.1 percent.”
“Sales of single family homes and condominiums fell across Massachusetts for a fourth consecutive month in July. ‘Today’s buyers are looking for value and many are still holding out for lower prices,’ observed MAR President David Wluka.”
“‘Increasingly, sellers also have stopped actively looking for homes until they have reached agreement on the sale of their own home,’ he noted in explaining the more moderate sales pace during July.”
“‘With such a large inventory of unsold homes, we’re beginning to see more realistic pricing on the part of sellers, and now that mortgage rates have fallen back below 7 percent, there’s incentive for buyers to get more serious,’ said Wluka.”
“Data from the MAR report shows that the number of residential listings has increased 23 percent over the past 12 months, from 51,178 homes and condos on the market in July 2005 to 63,144 homes and condos for sale this past July.”
From the talking points. “The 25.3 percent decline in detached single-family home sales in July represents the largest annual decrease in monthly home sales since April 1995 when sales fell 39.3 percent. The slower sales pace this July reflects a more cautious approach to home buying..along with growing resistance on the part of buyers to current market pricing.”
“The number of condominiums for sale has increased 36.3 percent in the past year, from 15,174 units last July to 20,677 in July 2006.”
The Boston Herald. “Bay State house sales plunged a stunning 27 percent in July, the biggest drop in 11 years, new figures show, and experts see few signs of a turnaround any time soon.”
“Lots of would-be home sellers are finding no takers. Erika Cummings hasn’t gotten a single offer on her West Roxbury home despite cutting her asking price three times since listing the place in May. ‘It’s really weird,’ said Cummings, who just four years ago had buyers outbidding each other for the last home she sold.”
“In Roslindale, JoAnne Kelly has held a dozen open houses and reduced her asking price several times, but gotten just one offer so low ‘that I told the broker ‘Don’t even write it up.’”
“‘I’m four months into this process and I’ll tell you, I don’t see any light at the end of tunnel,’ Kelley said. ‘I don’t how much more (would-be buyers) could ask from me, other than my first born.’”
“Experts are split over whether the latest downturn represents the start of a major collapse, a bursting real estate bubble - or just a one-time blip. ‘I suspect this is the big shoe dropping, although I have some doubts,’ said Yale University economist Robert Shiller.”
“John Bitner, chief economist of Boston-based Eastern Bank, said, ‘Last year was not a normal, real estate market,’ Bitner said. ‘It was frenzied with speculators trying to buy and flip homes and first-time buyers trying to get in before mortgage rates went higher.’”
“The economist doesn’t see the latest numbers as signaling a collapse, ‘just a correction in real estate that we had expected.’”
Note: the blue links at the MAR site are PDF’s.
It’s gonna be a pricing death spiral because buyer’s aren’t gonna know where the bottom will end up. And who want’s to be stuck for an unantipated $100k value drop…MF!!!!
Sure the f*ck glad I’m not sittin’ on a big mortgage right now.
Damn price of a 12 pack of Schmirnoff-Ice is $18.00- plus deposit!!!!!!!!!!!
I prefer Bass myself at a more accesible $14 for a 12 pack!
The only way Bass is acceptable is on tap. In a bottle it blows.
I take what I can get. In my town, the police are parked in every bar waiting to nab the next person out, so until I can get a Bass Keg installed at home, I unfortunately will have to stoop to drinking it out of the bottle. It of course beats the hell out of drinking Bud or Miller!!!
I would have to agree with you there.
pinch-a-penny,
How dare you besmirch the fine reputaion of the “High Life” as it clearly is the “champagne of beers.”
And Bud is Paul Newman’s choice of beers….
‘It’s really weird,’ said Cummings, who just four years ago had buyers outbidding each other for the last home she sold.”
No, no, no, child.
Today is normal. Four years ago was “weird”.
‘Today’s buyers are looking for value and many are still holding out for lower prices,’ observed MAR President David Wluka.”
- Wll, Duh!
“Experts are split over blah blah start of a major collapse, a bursting real estate bubble - or just a one-time blip. ‘I suspect this is the big shoe dropping, although I have some doubts,’ said Yale University economist Robert Shiller.
- To Professor Bob Shiller … it is the BIG SHOE IN THE ASS!
Shiller is incredibly frank for a high-profile economist, but even he has to hedge his statements with weasel words. Even a minor slip in timing will be used by the permabulls to discredit him.
That doesn’t mean you’re not right about the “big shoe”.
By my estimation, yes, this is the ‘other shoe dropping’.
The other shoe hasn’t even left the ground yet. My estimation in Mass at least, is when you see people selling houses at circa 1997 prices, that is the time that the other shoe dropped. We are just getting started, and my popcorn is in the microwave with the selection for the DVD on my screen.
It’s more like people buying houses from the bank at circa 1997 prices. I remember small billboards in front of houses posted by banks that really needed to unload. What was available in 1992 at $85,000 is today’s $500,000 Mc Mansion. The Mass. market has a LOT of downside potential.
Hey all,
I recently read that some of the most overvalued markets (CA, FL, AZ) in Fall 2005 posted the biggest price gains into early 2006. How can this be? How can places that are so grotesquely overpriced still be rising? The coast may be somewhat more desirable than other areas, but not THAT much more desirable, or else historic prices would reflect the differences.
For instance, Ashland, OR, where I live, is up 17% YOY from last year despite being the most inflated market in the PNW. Other areas are also still rising, (i.e., some areas in Seattle,etc.). Some people are arguing that some secondary bubble areas (e.g. Sacramento, Phoenix, Reno, Las Vegas) will decline quickly, but some of the more desirable retirement, telecommuting, or resort areas (e.g., Monterey, Bend, OR, Ashland, Tahoe, Vermont,etc.) will prove -semi-immune to the upcoming declines. However, it seems to me that that these places are well-known, overpriced, and had already risen well past their premium by early 2005.
Does anyone know how some of these secondary markets will fare. I still cannot figure our the math, with the baby boomers, telecommuters,etc. complicating the general bubble pattern.
Do not be fooled by median pricing. The price of homes in a ‘market’ is very difficult to measure accurately because each home is unique and they don’t trade every day. The median price can be very misleading, especially when a market is turning. Your best indicators are sales and inventory. Double-digit declines in sales with rising inventory will absolutely result in lower prices. The more dramatic the increase in invetory the greater the decline will be.
Very few markets will emerge unscathed from the coming debacle.
Thank you Steve.
May I just change your ‘very’ to …
NO few markets will emerge unscathed from the coming debacle. Except of course So Ca.
check out the Nasdaq chart from the mid 90s to 2001. Things look ridiculous up to ‘99 and then get even more insane.
Fellow Ashlander here,
It’s true that there are lots of different factors that are at work here in Ashland, but if you look at the growing inventory (10+ months right now) and the number of price reductions (20% of all listings since January have had at least one reduction in the sub-450,000 range), I think it’s pretty clear where the Ashland market is heading.
It is a special place for sure, but the crazy run-up in the last few years just isn’t sustainable.
I have been through Ashland many many times in my life, usually stopping for gas or a bite to eat, sometimes staying the night, as I traveled from NV to WA. While southern Oregon is no doubt beautiful, I have yet to see evidence of those high paying jobs which would justify these high home prices. Retirees alone cannot carry a whole market, a neighborhood maybe, but not a whole market. The prices in Ashland, Medford, Grants Pass, etc. seem hysterically outrageous when one takes into account the local economy.
Mr. Fester,
I sure don’t mean to sound negative here but in a word, not well. These are more accurately described as “sub-markets”. If our respective primary markets catch a cold, we’ll have pnuemonia. Bend is already seeing a marked ramp up of inventory. One local said “every where you look there are For Sale signs” (but nothing to rent!) I telecommute from rural OR but I’m a distinct minority. The places you mention are markets where people bought “second homes”. The general facade was that these would some day become retirement homes. As Ben himself is fond to point out this mentality was just another excuse to speculate. Most have never been slept in and yet they seem to have outlived their “utility” to the owner? So many on the market were built in 2003 to 2005. Hey, if we made this much on our primary residence (why not double our profits?)
nnvmtgbkr is the real expert on how “resort areas” will fare. I’m afraid he won’t be as generous as I have.
Reply to Mr. Fester: Bear in mind that as markets slow, median price often continues to rise. Just means that the top end is holding up better, which makes sense because those folks are less impacted by rising interest rates. A rising median does NOT mean that all houses have appreciated 17% YOY, but of course the MSM doesn’t want Joe Sixpack to figure that one out.
Lisa,
I think you hit it on the head. Or at least I have been coming to the same conclusion about the median. However, I have been hearing the usual swill from the real estate industry about how this latest blip justifies the absurd prices. I wish Kaleefornia would just bite the dust and get it over with.
Great summation! I would also add that the low end of the market can also be taken out by higher prices (low affordability index) and not just rising interest rates … though rising interest rates certainly don’t help matters!
Thanks for the ideas all,
I do have a dog in the fight (own a very modest home in Ashland), but I would prefer to see prices go down, before the town is completely ruined. We need more kids and fewer Hummer driving blue hairs around here. It has just been ridiculous the last few years.
I agree that it is very confusing to think about median prices. My take on Ashland, OR is that the temporary blip in the median my reflect the fact that ONLY equity rich Kahleefornians have been able to buy here this year. Locals and first time home buyers are completely shut out. Maybe that is a good thing. Once the equity locusts get a fleecing, they may be less inclined to double the pleasure with a second home here.
As a native Kahleefornian, it’s my observation that while the equity locusts of this state are indeed eating up other state’s housing, it is only because they long ago clear-cut housing here. Income-wise, California is in no better shape than most states - and housing is twice as expensive. Sucks everywhere, and here too.
Agreed. Yes, I respond primarily to the people pricing us out our our towns, but it certainly happened in Cal. over the last couple decades. I suppose it is the flippers/speculators that toasted everything everywhere.
Mr. Fester, I sold my home in the Bay Area and am waiting to buy in Ashland. I looked a couple of years ago, but refused to get into a bidding war situation with other folks from California. Didn’t make any sense to me.
It seems that market is very, very dependent on “outside” money (e.g. CA and FL), and once that slows down, those houses are going to sit until the prices come down to where the locals can afford them. Who else will remain to buy them? Do you agree? Can you see this happening there? I’d love to think prices will correct at least 10% by the end of 2007.
Any feedback is so appreciated!
I think they will correct by at least 20%. But, as my previous post suggested, still a bit curious about how we will be affected by the seemingly endless diaspora of retiring urbanites. Two thing seem certain: 1) Investor-owned homes (~20-30 percent of recent sales in Ashland) will decrease; 2) folks in other bubble areas will have a harder time selling or helocing their homes to buy here. However, we seem to keep topping retirement places rated and the Shakespeare Festival keeps attracting a very difficult demographic-well-heeled boomers. AND we are small and have an Urban Growth Boundary, adding to the space premium. My goal is not to trash the Californians, but that conditions change so that they are not the ONLY people moving into town. Ashland has always been an interesting mixture of California and Oregon; I would like to get that mix back one day.
Mr. Fester, With inventory 3x what is was last year, and sales down versus YAG, there may not be enough retiring urbanites to keep the Ashland market propped up. I think they’re one slice of the market, and an important one, but not a big enough pool for a market with 20,000 population.
I hope you are right.
I think the flippers are definitely flopping, which is delightful to watch.
Bozeman, MT is very much like Bend and Ashland… and after a very strong spring–good sales and increasing prices–the market completely tanked this summer. YOY we still have increases, but MOM we have been declining since May. It is just a matter of time until we see large YOY declines.
My take is that these second home, resort towns will be hit harder than most but will probably see a delayed reaction to the declines in primary markets. Real estate agents like to claim that Bozeman is “special” and immune to national trends, but if that were true we wouldn’t currently have 920 homes on the MLS (almost all active) for a town of 35,000 people.
THere are no jobs here, people don’t have to live here, the population has always been highly transient, and almost all of our economic growth over the past 10 years has been connected directly or indirectly to the real estate boom. Just imagine what happens to a town of 35k when 5-10k loose their jobs.
Ashland and Bozeman are quite similar in terms of the trends, characteristics you mention, so you make a good argument for declines. Ashland is a misty dream for some, but once they get here many move on for a variety of reasons: poor job market, grossly overpriced housing, too much heat, too much rain, modest nightlife, too many ….hippies, red necks, Bay Area posers.too little diversity, lack of anonymity,etc.
May the deflation begin!
In in Hood River, the slowdown has started. Very similar area to Bozeman, Bend, etc - mostly a recreational place where all the rich Calf’s come in and buy r/e without even looking at the price.
I’d guess prices are down 5-10%, inventory has skyrocketed, at least 3x over last year at this time. Some of the r/e is moving, but the prices are down a bit.
Of course, it’s different here, and won’t crash like the rest of America. Ha.
The NAR may want to publish this for FBs and GFs-
Stages of Grief and Loss
It is helpful to understand the stages of normal reactions to grief in order to know what to expect when loss occurs. Reactions are not only seen in those who have experienced death, but also in anyone going through a traumatic event. The following stages of grief and the accompanying emotional and physical reactions may help you in adjusting to a loss.
Not all individuals move through these stages one after the other, but instead experience a range of feelings. It is common to move back and forth between stages before ultimately accepting the loss.
Stage 1: Denial
Following the loss of a loved one, denial serves to protect you from feeling the immediate impact of the traumatic event. Some common reactions during the Denial stage include:
shock or numbness, feelings of emptiness and unreality
tendency to isolate from family, friends and loved ones
maintaining unrealistic expectations for the future
hearing the deceased person’s voice, expecting to meet them, or constantly sensing their presence
Stage 2: Anger
As the level of denial decreases, more emotional reactions to the particular event may emerge. Specifically, feelings of unjustness or unfairness to the event are common. Some common reactions during the Anger stage include:
questioning of why the loss occurred
a need to assign blame to rationalize the loss
accusations towards family members or friends of uncaring attitudes
anger at the loved one for leaving
Stage 3: Bargaining
During this stage, issues of guilt associated with the loved one are present and you may cognitively or emotionally attempt to change the outcomes of past interactions. It is not uncommon to unrealistically associate your behavior in the past as contributing to the loss. Some common reactions during the Bargaining stage include:
intense preoccupation with the past
expressions of “ought” or “should” related to the deceased
making promises with the intention of bringing about unrealistic events
Stage 4: Depression
As you realize that your efforts at bargaining will remain unrealized, an understandable feeling of sadness or loss will occur. This depression may occur before (preparatory) or after (reactionary) the actual loss. Some common reactions during the Depression stage include:
overwhelming feelings of sadness
inability to concentrate and focus
difficulty making decisions
unexplained mood fluctuations
inability to sleep, or oversleeping
loss of appetite or overeating
fatigue
Stage 5: Acceptance
Acceptance is considered the final stage in the grief process. Understanding the role of the loved one in your life (even though they are not physically with you) and realizing this role does not change your love for them. Some common reactions during the Acceptance stage include:
talking about the deceased positively / realistically
reinvesting emotional energy in other people and things
resuming normal activities
It is necessary to experience the pain of loss, to accept the loss, and to adjust to the change caused by it. The grief reaction is the product of this process. With time, the intensity of feelings associated with each stage seems to decrease, but each individual differs in the length of time for achieving healthy resolution. The grief reaction cannot be turned on and off; no quick fix exists for making it go away. Healthy resolution requires “grief work” with some experience of all five stages.
Substitute “net worth” for “loved one”
Substitute “net worth” for “loved one”
ROFLMFAO!!!!!!!!
There’s still a lot of denial out there, we have a long way to go.
I think that it is about time to expect a dead cat bounce in Mass. I think that enough lemmings might drink the cool aid right now, that prices have dropped since last year, but as interest rates drop, then it is a good time to buy…..
It depends on whether lemmings want to catch a falling knife, if lemmings can still get financing, and if lemmings read blogs…
The lemmings can’t read at all evidently.
Or one lemming reads the wrong thing, and the rest of them follow.
Prices usualy drop with rate cuts. Rates cuts mean the Fed is worried about recession, people are afraid to buy with a recession looming on the horizon. Prices take off after the Fed stops cutting rates and begins to raise. Then people rush to buy before rates go up. Thus the surge in buying we saw the last two years, as rates rose.
“‘I’m four months into this process and I’ll tell you, I don’t see any light at the end of tunnel,’ Kelley said. ‘I don’t how much more (would-be buyers) could ask from me, other than my first born.’”
Let’s wait a few more months, for that desperation to kick in. You would probably give up your daughter to a guy named Karr.
http://stupidborrowers.blogspot.com
How about feeding the squirrels every other day?
If she is pretty, the buyer might ask for lap dances.
Man, get a load of those value drops in the examples of stupidborrowers.
$1.1 mil to an offer of $475k.
$450k purchase in ‘03 to $260k current sale.
NO doubt in my mind those bloggers calling for 50% value drops from ‘06 levels are gonna be right on the money.
It’s gonna be a bloodbath like no one can imagine.
“‘With such a large inventory of unsold homes, we’re beginning to see more realistic pricing on the part of sellers, and now that mortgage rates have fallen back below 7 percent, there’s incentive for buyers to get more serious,’ said Wluka.”
More realistic prices on the part of sellers translate into falling knives in the hands of recent buyers.
“and now that mortgage rates have fallen back below 7 percent, there’s incentive for buyers to get more serious,’ said Wluka.”
More serious about what? Waiting? Then yes, I agree with you. Let’s see, two of the RE industry’s biggest pressure tactics were “Buy now or be priced out forever”, and then “Buy now before rates go up and you’re priced out forever.” So, now that we have home prices dropping and rates at least holding steady, maybe even dropping, what’s the buyers big hurry. If I’m a potential buyer I’m gonna pull up a chair and watch this thing play out before I go out and do something rash like buy a house. No hurry here….
Actually rates went up, they are now 1.25% on the toxic loans. They were 1% for the last 5 yrs. Better but now before they go to 1.5%.
Everyone refers to the long term fixed rate when talking about rates, which I’ve found to be hilarious for the last few years because hardly anyone uses the 30yr or the 15yr product when buying homes. Even though it’s hardly being used these days, the 30yr fixed is what folks use as abenchmark for rates. The last couple of weeks has seen the 30yr come back to the levels we saw in April, but it still offers little relief to those that are drowning in their ARM resets.
““‘I’m four months into this process and I’ll tell you, I don’t see any light at the end of tunnel,’ Kelley said. ‘I don’t how much more (would-be buyers) could ask from me, other than my first born.’””
I definitely don’t want your firstborn - that little growing money drainer is your problem. I would, however, like you to drop your price for that house one more time…:)
Some of these people are going to get haircuts starting at the neck…
“The economist doesn’t see the latest numbers as signaling a collapse, ‘just a correction in real estate that we had expected.’”
What the hell are they talking about? Not one person involved in the real estate industry forecasted ANY type of correction or decline in prices this year. All of them expected “modest” appreciation in the 5-7% range.
-X
They are engaging in a retroactive forecasting exercise
There is a lobotomy factory outside the NAR and economists and RE execs all went there 2 years ago on an all expenses paid vacation - and all go the same model chip implant, hence the eerie similarity in their simpleton statements this last year.
And now for the good news……….hehehe
http://www.marketwatch.com/news/story/story.aspx?guid=%7BE18E95AF-DBFF-4EE4-ACF7-530A3CD714D3%7D
Wall st. is trying to Jawbone the Fed. It worked, they paused.
I respectfully disagree. Bernanke can justifiably be worried at this point that his worst fear — a deflationary depression — is knocking on the door. Since Fed Fund rate hikes affect the economy with long and variable lags — maybe 9 to 18 months — whatever effect of the measured series of rate hikes are showing up in current economic conditions are due to FOMC decisions taken last Fall, and despite the steady crescendo of murmurings about a hard landing in the housing market, another year or so of lagged monetary effects are baked into the cards. Driving while looking out the rear view mirror is rather challenging, and for a novice who is coping with hazardous road conditions, I think Bernanke is doing remarkably well with keeping the USS Enterprise from tanking.
Man I agree with the deflation scenario. All that “alleged RE wealth” trillions disappearing. And wages are really flat for most people. If this was the seventies, (before globalization) there might have been a way out of this, but hell no, the barn door is open.
GS, If you have the time and inclination, could you explain how and why rate hikes take so long to work their way into the economy.
Thank you for posting that, Luvs_footie.
I noticed as you read down other economists call him an “Eeyore” as he is virtually the only major one predicting a recession next year. But I’m wondering if the quote should have read “only American economist” as I feel we’ve read some IMF links where Foreign economists are making similar claims.
Anyone who missed todays news on the collapsing real estate market is either camping right now or fighting summer wildfires. Every media outlet has had this covered today.
A week ago I mentioned the huge decline in the hottest markets to a co-worker who just bought his first home and he dismissed everything spouting 10% every year, blah blah blah. Today he read the news and was decidedly speechless.
The real estate crash was the topic of discussion Howie Carr’s WRKO show tonight. WRKO is a Boston AM talker; doesn’t normally talk real estate, more of a conservative talk station (think Fox News type stuff). Lots of callers reinforcing what we are witnessing in Massachusetts: an epic real estate crash unfolding way faster than anyone really predicted. The tone was grim, and even Howie had to admit defeat. His wife is a Realtor, interestingly enough.
Thanks so much for posting the information about Howie Carr’s program. Since he writes for the Boston Herald, and their coverstory asked “Has the Mass. Housing Bubble Burst?” guess it’s not surprising that he “admitted defeat.”
Ironically, it’s nearly a year to the day that the Mass. Association of Realtors incoming president appeared on a rival talk show and denied that buyers were in danger of buying at the top of the market, see blog post on our site entitled, CAUTION: You are entering “The Bubble Spin Zone.”
http://tinyurl.com/kallb
To give credit where credit is due, MAR disclosed some pretty discouraging news today. The 3.5% decline in median single-family home prices they reported was:
(1) the largest annual price decline since March 1993;
(2) median sales prices have declined for six consecutive months, and
(3) that’s the longest slump since housing prices fell 13 straight months from March 1992 to March 1993.
The Warren Group, a more complete data source which includes non-MLS listings, reported that the decline in median single-family home prices was nearly twice that reported by MAR, and the median price in July was actually lower than 2004!
Still, despite the lowest prices in two years and the sharpest drop in sales since 1995, MAR’s talking points continue to understate the risk for homebuyers:
“Today’s lower prices reflect softening buyer demand and rising in inventory levels, which have started to trigger modest price adjustments on the part of sellers. With demand still historical strong though, major price corrections are unlikely.”
If homebuyers look beyond median prices to individual transactions, they’ll see that major price corrections are already underway. For details, including a map of nearly 400 homes sold recently below assessed value in 27 of the most expensive cities and towns in Greater Boston, see blog post earlier today entitled, “Industry’s seller bias understates risk to homebuyers.”
http://tinyurl.com/qj6xw
If anyone is interested in creating their own bubble map to track document falling prices in their local market, please let us know so we can link it to http://www.realestatebubblemap.com.
“‘Increasingly, sellers also have stopped actively looking for homes until they have reached agreement on the sale of their own home,’ he noted in explaining the more moderate sales pace during July.”
You should NEVER take on a second mortgage unless you have a contingency in the contract stipulating that the first home be sold before closing. I really don’t know what’s wrong with these people. It’s SUCH a shame.
Stunads!
Eh, Wassamattafayou? 
So they can’t get buyers, which explains the lower number of sales. Have I got this right? It makes sense, since everyone knows about the housing bubble bursting by now, both buyer and seller, or anyone who takes an interest in housing.
But I’m not sure why this should be a problem for many people who are moving up, out, sideways or whatever. If they put a contingency in their contract, they can protect themselves from beig forced to buy a house they have contracted for. If they have to sell low, then the property they’re buying will probably be lower priced, too.
The problem is precisely that. For sales to happen, they need to sell their existing house, but nobody is buying because in MA the first time buyers (Historically people with stable jobs, that are starting a family, and are looking to stay a long time are a rarity) have vanished, replaced by illegal immigrants, and old people. Illegals are just worried about “la migra” and old people about what pill they need to take to extend their feeble lives.
And finally, the best thing to do in any market is NOT to coordinate two deals at once. I suggest renting for a time in between purchases to give you a chance to choose among properties available.
If you find yourself at the closing table between 2 sales, do you think all the sharks involved are going to give you a break, knowing that you need a place to reat your head for the night? NOT on your life! They are going to screw you good while they have you exactly where they want you. Just keep writing out those checks!
Best of luck everyone!
reat= rest! (Sorry)
Plus- When you find yourself at that table, between houses, they KNOW very well that you CAN’T walk away, which is a TERRIBLE position to be in.
I can’t see how this thing won’t turn into a death spiral. With RE no longer being a good investment, why would anyone want to leverage a half million dollars or more for something that is a becoming a highly illiquid loosing proposition? Even if you can afford that much debt today, with globalization continuing its path of destroying decent wage jobs, you should have some doubt that you can afford it five years from now.
I think we are heading into a deflationary spiral, with all of this so called “wealth” tied up in RE evaporating.