Skittishness Seems So Last Year
The Glendale News Press reports from California. “The real estate market in Glendale ticked upward again last month after a brief stall in March, reflecting an ongoing limited number of homes for sale and a multitude of potential buyers, according to the latest real estate report. Realtor Anne McDonald said that Realtors aren’t sure why more sellers aren’t taking advantage of the tight market. ‘We’re speculating that sellers are kind of waiting for prices to go up for a little bit before putting their house on the market,’ she said.”
“Despite the fact that sellers are getting multiple offers on their listings and the continued increase in prices, McDonald said she didn’t think any trouble is brewing in the market. ‘I don’t think we’re really heading for a bubble right now. Right now, it’s just kind of correcting itself,’ she said, adding the market is not where it was in 2003 and 2004.”
The Wall Street Journal. “In California, the number of homes sold in recent months that had been flipped—or bought and resold within six months—has reached the highest levels since late 2005, according to PropertyRadar. The growing competition from investors is unwelcome news for ordinary buyers. After waiting years for prices to hit bottom, ‘buyers are jumping in before prices bounce so high they can’t afford it,’ said Christine Donovan, a real-estate agent in Costa Mesa, Calif.”
The Santa Ynez Valley News. “On April 19, after renting in Los Alamos for two years, Cliff and Rowena Chapman closed escrow on their Orcutt home. ‘We feel that the interest rates are still low and, we’ve been watching the news, we feel the housing market is starting to turn. We think housing prices are going to march up,’ said Cliff Chapman.”
The Santa Cruz Sentinel. “Buyers are snapping at new offerings like hungry fish. Of the 143 sales, 23 were on the market for seven days or less. That includes seven for zero days, indicating the house sold within 24 hours or was a ‘pocket listing,’ where the agent did not post the listing on the MLS. ‘This is becoming more common as the market becomes increasingly competitive,’ said Jim Harrison, MLS Listings chief executive officer, noting 12 percent of last year’s sales in Santa Cruz County were pocket listings.”
“In some neighborhoods, home values are spiking up so fast appraisals have yet to catch up. The owners of 5 Cabernet Court in in Scotts Valley listed their four-bedroom home for $899,000 and got five offers, most of them local. The buyers paid $953,000. ‘They paid $64,000 over the appraised value,’ said Gayle O’Neal of American Dream Realty who represented the sellers. ‘Buyers are coming in with no loan contingencies, no appraisal contingency and no inspection contingency. If it doesn’t appraise (at their offer), they’re going to have to pay the cash. It’s mind-boggling how quickly it’s changed,’ she said. ‘You have to educate buyers and have them ready to go. You have to write the offer that day. It won’t be there tomorrow’”
“A two-bedroom home in Capitola was on the market for 277 days before it sold for $850,000. Judy Brose, the seller’s agent, said the house went into escrow twice without closing when buyers had second thoughts. That skittishness seems so last year.”
The Mercury News. “Despite increasing prices, many homeowners still have low levels of equity and aren’t willing to sell, Zillow said. A homeowner would need about 20 percent equity to put a house on the market and cover a down payment on the next home, real estate fees and other expenses, said Zillow’s chief economist, Stan Humphries. Many homes have moved back ‘above water’ — a home is underwater when it is worth less than the amount of its mortgage — but that isn’t enough. ‘A bunch of people don’t have the down payment for their next house,’ he said.”
“‘I have a lot of conversations with some of my clients who are wanting to break even,’ said Noreleen de Mesa, a broker in San Bruno. ‘A lot of them are still dabbling with the idea, but the majority are probably hanging on to their property, hoping the market continues the route that it’s on.’”
The Union Tribune. “The share of San Diego County borrowers who are underwater on their mortgages continues to fall due to home-price gains, says a recent analysis from real estate website Zillow. So why aren’t more homeowners freed from negative equity listing their homes in this supply-constrained market? Negative equity in the county stood at nearly 25 percent in the first quarter, down from 28 percent during the last quarter of 2012, Zillow figures show. The first quarter’s percentage translates to more than 114,000 homes with underwater mortgages, equalling $13.7 billion.”
“When crunching the share of San Diego borrowers who have less than 20 percent equity, what Zillow calls the ‘effective’ negative rate hits nearly 44 percent. ‘There two big factors distorting the market. … The first is negative equity … and the second big distortion is incredibly low interest rates,’ said Stan Humphries, Zillow’s chief economist.”
From 10 News. “The scarcity of homes for sale has led to a seller’s market in San Diego County, but is there a so-called shadow inventory of homes that could soon flood the market? Realtor Arnie Levine says many homeowners that survived the down market are reluctant to sell. ‘They figure if they wait it out, they’ll have positive equity and then they’ll sell,’ said Levine.”
“Nationwide numbers show a so-called shadow inventory lurking — some 2 million foreclosures, short sales and mortgage delinquencies that could lead to foreclosures. In San Diego County, that shadow inventory includes some 13,000 mortgages currently delinquent, according to Fitch Ratings. So if the banks don’t release the properties, what happens to them? Mark Goldman, an SDSU Real Estate lecturer, points to speculation. Banks could make more money by selling to pools of investors who would then rent out the homes. ‘I don’t think we’re going to see a sudden deluge of properties,’ said Goldman.”
The Contra Costa Times. “Millions of Americans have lost their homes, and millions more could meet the same fate. Now, a San Francisco investment firm thinks it has found a remedy and a willing partner in a Bay Area city that is no stranger to pursuing radical ideas. The idea is to use the tool of eminent domain. Under a plan now taking shape, Richmond would seize underwater mortgages and work to refinance them under terms the homeowners could afford. A report released last month by the alliance revealed that 900 Richmond families lost their homes last year and that 4,600 local homeowners were underwater on their mortgages by about $700 million.”
“Robert and Patricia Castillo bought their three-bedroom home in the North and East neighborhood in 2005 for $420,000. Today, its value recently climbed back over $200,000, but the Castillos still struggle with an $1,800-per-month mortgage payment, which is set to increase to $2,500 in 2015. Their mortgage has been passed between several servicers and lenders, and they hope they would quality for the plan.”
“‘It’s a struggle daily,’ said Robert Castillo, a diesel mechanic for the Berkeley school district. ‘Many of our neighbors have lost their homes.’”
‘So what will it take to really get the Inland Empire’s economy back on track? “We’re not getting as much growth in manufacturing as we should and construction is waiting for all the underwater houses to be dealt with,” Husing said. “That’ll probably take another year or two. Construction is down 1,800 jobs from a year ago, and the government sector was off 3,300 jobs from last year.”
At the end of the Contra Costa Times article:
‘Much has been made about the housing market implosion and foreclosure crisis, the worst correction in the housing market in generations. Recent studies have sought to highlight how this national scourge has played out on a local level. While it should be noted that some — especially major mortgage-lending banks — dispute the methodology used in the reports, the wealth destruction wrought on Richmond by home value losses and adjustable rate mortgages is staggering. Today, half of all homeowners in the city are paying off loans that are worth more than their house and equity.’
Highlights from recent reports:
Richmond in 2012
914: Foreclosures
$1.4 million: Decline in property tax revenues to the city, including $7.9 million cost to local government from 2012 foreclosures
4,649: Underwater homeowners, or 49 percent of all mortgages in the city
230: Homes in the foreclosure pipeline
$712 million: Negative equity in underwater homes
Foreclosure rate: 30 per 1,000 homes (U.S. average: 13 per 1,000)
Sources: Alliance for a Just Society report, May 2013; Alliance of Californians for Community Empowerment Housing report, 2013
I’m confused. I thought it was nothing but up, up, UP! Are they telling us there are homeowners in California that aren’t walking on air with their winnings?
the party is back. I wonder if the bailouts will be so aggressive once the banks unload all their inventory?
IF the banks ever get their books in good shape and not dependent on housing prices watch out below. Not sure that’s possible, though.
IF the banks ever get their books in good shape and not dependent on housing prices watch out below ??
I would tend to agree….IMO, the whole policy position is for the banks and institutional investors so they would not implode…
When those balance sheets are healthy (and we will not be privy to when that is) then I see a swift exit by the Fed…Unintended consequences be what they may…
If the bubble returns with a vengeance to that smoggy armpit better known as the Inland Empire, then we know we’re hosed.
I posted this a few weeks ago:
‘As investors pour money into the real estate that toppled to bargain-basement prices in the housing crash, real estate agents and buyers who are helping the moribund market snap out of its coma are getting worried about a Wall Street-inspired bubble. Drawn by the prospect of high profit margins on rents and re-sales of homes, hedge funds, Wall Street investors and flippers are muscling out home-grown shoppers in Inland Southern California.’
‘The dynamic has gotten so pronounced, Realtors admit they’re getting edgy about the run-up in price. “I’ve never seen anything like this,” said 30-year real estate veteran Freda England of Century 21 Lois Lauer Realty in Redlands. “This is crazy. Five, six years ago we dealt with sales with multiple offers, but we weren’t competing with investors. “This is not normal,” England added. “Our young, first-time buyers are getting shot out of the water.”
“Willard said she is thrilled about the $250,000 sale and somewhat rattled by better-than-expected gains. Going in, the Air Force auditor said her only goal was to pay off the mortgage. “I feel like this is a mini-bubble, where things are spiking up at the moment,” she said. “People want homes so bad they’re throwing everything they have at it to get in while they can.”
Check this part out:
‘Cash buyers have the advantage,” particularly on homes in the low-price range, von Entress agreed, and some are wielding it to make investments that bring up assessed values in their own neighborhoods.’
‘That’s exactly how the sale played out in Menifee Lakes, von Entress said. Willard’s buyers were local investors with property in the area. “They viewed the sale as a way to drive up comps,” he said.’
http://www.pe.com/business/business-headlines/20130503-price-wars-realtors-say-inland-buyers-feeling-the-squeeze.ece
+1 Colorado….Spot on….
We are firmly in the obama housing bubble v2.0.
Hope and change for everyone!
———————–
The Santa Cruz Sentinel. “Buyers are snapping at new offerings like hungry fish. Of the 143 sales, 23 were on the market for seven days or less. That includes seven for zero days, indicating the house sold within 24 hours or was a ‘pocket listing,’ where the agent did not post the listing on the MLS. ‘This is becoming more common as the market becomes increasingly competitive,’ said Jim Harrison, MLS Listings chief executive officer, noting 12 percent of last year’s sales in Santa Cruz County were pocket listings.”
“In some neighborhoods, home values are spiking up so fast appraisals have yet to catch up. The owners of 5 Cabernet Court in in Scotts Valley listed their four-bedroom home for $899,000 and got five offers, most of them local. The buyers paid $953,000. ‘They paid $64,000 over the appraised value,’ said Gayle O’Neal of American Dream Realty who represented the sellers. ‘Buyers are coming in with no loan contingencies, no appraisal contingency and no inspection contingency. If it doesn’t appraise (at their offer), they’re going to have to pay the cash. It’s mind-boggling how quickly it’s changed,’ she said. ‘You have to educate buyers and have them ready to go. You have to write the offer that day. It won’t be there tomorrow’”
‘Listed for $469,000, this home sold for $500,000. Sandy Hockman, the seller’s agent, said the seller was the original owner and had invested in upgrades. “We went with the all-cash offer,” she said. “We knew it wouldn’t appraise (for that price).”
Appraisals sure went out the window fast. As we learned recently, the appraisers have caught on all across the country and are now putting “values” based on how many people are making offers. Which brings up a theory I have:
‘It’s mind-boggling how quickly it’s changed’
There was a similar comment out of the Florida post yesterday. Some accounts say this all exploded last summer, 2012. Hedge funds throwing money around. Loans getting riskier, in the face of rising prices. If you don’t pay your mortgage, nobody will kick you out. The white house telling banks they won’t be prosecuted for bad loans. Banks won’t release their inventory and drown you investors. We hear this all the time:
‘I don’t think we’re going to see a sudden deluge of properties
It’s all being picked up real fast, huh? Almost like it’s understood that the government, banks and central banks won’t enforce any law or contract that stops house prices from rising. In other words, there will be no moral or legal hazard from chasing this pot of gold.
“Almost like it’s understood that the government, banks and central banks won’t enforce any law or contract that stops house prices from rising.”
Good thing these guys aren’t in the fire protection business. Clearly upon seeing a developing flame, they would douse it in kerosene dumped from helicopters in order to enjoy the view of a major conflagration.
The Dow is falling up again. It’s dropped all the way up to 15,307, and still falling! And gold has risen to below 1400…
Dow 15,307 -101 0.66%
Nasdaq 3,470 -19 0.54%
S&P 500 1,649 -11 0.67%
GlobalDow 2,211 -11 0.49%
Gold 1,388 +8 0.60%
Oil 94.73 -0.24 0.25%
May 29, 2013, 9:21 a.m. EDT
Will the Great Rotation become the Great Unwind?
By John Nyaradi
In recent weeks, we have been reading about how the Fed’s quantitative-easing program has brought a “great rotation” out of bonds and into stock funds as the major American stock indices continue to hit new record highs on a daily basis. Despite all the hype about “the great rotation,” reports from ICI reveal that during the first quarter of 2013, bond-fund inflows were $69 billion, compared with $19 billion going into stock funds. Beyond that, what has been hyped as a great rotation could soon be turning into a great unwind as QE magic begins to wear off.
…
how many shares of FB are you gonna buy during this dip?
FB?
‘With money fleeing zero-interest rates, and people wanting a return on their investment, real estate has become one of the sectors where investors are increasingly confident they’ll not only get a return of assets, but a return on assets. “Real estate is the new gold,” Gundlach said. Gold went up because it went up, and real estate went up because it’s going up, and there’s kind of a panic. Doubtless, it will lead to affordability problems, which will lead to headwinds for the housing market down the line. But first, it has to move higher.”
http://www.thestreet.com/story/11934969/3/us-housing-it-has-to-move-higher.html
‘We’re speculating that sellers are kind of waiting for prices to go up for a little bit before putting their house on the market,’
It’s the Great Pumpkin, Charlie Brown
Lord please give me one more bubble and I promise this time I won’t blow it.
:
I mean a *real* bubble.
‘(Reuters) - Recent gains in U.S. home prices are coming too fast in some areas, particularly California, and could stall or reverse, Fitch Ratings said on Tuesday. California has seen price increases of 13 percent over the last year, Fitch said.’
‘In Los Angeles, for example, prices are up more than 10 percent in the past year despite a jobless rate that remains above 10 percent and real incomes that have declined over the past two years.’
http://www.reuters.com/article/2013/05/28/residential-recovery-fitch-idUSL2N0E915F20130528
This is all so depressing. I should just accept the fact that I may never buy a house in my life time. We can’t contain the stupidity in this country. It is overwhelming. I should be happy that I have a good paying job..for now.
I think about that a bit sometimes. But then I think hey, it could be a lot worse than if my current house ends up being my toe tag house. At least I’m free. Relatively.
“…‘buyers are jumping in before prices bounce so high they can’t afford it,’ said Christine Donovan, a real-estate agent in Costa Mesa, Calif.”
It’s a short squeeze! ‘Get shorty’ — again!!
From the article:
‘Robert Ganem beat out four other offers this year when he paid $600,000 for a short sale—in which a home is sold for less than the amount owed on its mortgage—in Ladera Ranch, in southern Orange County. He made cosmetic renovations—fresh paint, new hardwood floors and kitchen tiles—before selling it a few weeks later for $755,000. “A year ago, I couldn’t give them away.”
Again, a reference to summer 2012.
‘buyers are jumping in before prices bounce so high they can’t afford it’
So this flipper is determining what this house is worth via a bidding war? And ‘buyers are jumping in’ so they don’t get priced out forever? How could this could possibly go wrong?
Oh for the good old days, when we were told that investors were buying houses that yielded a great income on rents alone. These investors were never going to sell. Well, maybe in 5 years, but still.
Yes, the good old days; about a month or two ago.
Yes, the good old days; about a month or two ago ??
Oh so true Ben….MSM is now in full blown monthly data points on percentage increases… Local CBS news yesterday quote line was;
Interested in Buying a house in the bay area ?? Then bring “Cash”…
Un-Fricken believable…I shake my head in amazement…Although RW made accurate points yesterday about the valley and its job market it just seems to me that the wheels have came off the rails…
I’ve been re-reading posts on this blog from 2006 and it feels like deja vu. How did it happen that this blog stayed around long enough to be prescient TWICE?
By the way, nice (small) call-out in “The Great Short,” which I just read over the weekend–Michael Lewis mentions how housing bubble blogs were in a frenzy over the lunacy in the 2005-2007 market, specifically the infamous Bakersfield strawberry picker.
How did it happen that this blog stayed around long enough to be prescient TWICE ??
Lots of great insight and superb research is brought to this blog…
How did it happen that this blog stayed around long enough to be prescient TWICE ??
Because it never stopped being prescient to those paying attention? It’s only TWICE to everyone else.
What ever became of Crisp & Cole?
I don’t know, but any minute now David Lereah is going to reappear and say he was right all along. And all it took was a centrally-planned economy whose leadership is totally committed to perpetuating a folly.
Yeah, the smug homeowners are back in force, dude. Even the ones who own two houses, with one of them STILL being about 40% underwater. They are “smart” because they bought a second house at a low price, to match their first house that was bought at a normal price.
Whateva. If these people want to spend their paychecks to subsidize their tenants, then let them. I just gotta save up more powder to use during the next crash. I got my rent subsidy, so I’m good.
Crisp and Cole?
In the ‘Big House’ they’re going to be known as ‘Kneeler and Squealer.’
“When crunching the share of San Diego borrowers who have less than 20 percent equity, what Zillow calls the ‘effective’ negative rate hits nearly 44 percent. ‘There two big factors distorting the market. … The first is negative equity … and the second big distortion is incredibly low interest rates,’ said Stan Humphries, Zillow’s chief economist.”
This problem is easily resolved. Raise interest rates to anything like historical levels, and prices will correct down to affordable levels where a twenty-percent down payment is not over a year’s income for the average household.
The homeowners in negative equity position got there by their own financial decision. Nobody put a gun to their heads and forced them to buy a home during a historic bubble. They can hand their homes back to the bank along with the keys if they don’t like their negative equity positions.
“This problem is easily resolved. Raise interest rates to anything like historical levels, and prices will correct down to affordable levels where a twenty-percent down payment is not over a year’s income for the average household.”
Given the depth of the financial crisis, I thought for sure we’d be back to 20% or 20%+ down payment requirements by now. But to your point, that only works if prices are allowed to drop back to pre-bubble levels when traditional lending standards were the norm. Down payments, clean credit, money in the bank, no other debt, etc.
But no….endless Fed programs, state programs, delays in processing foreclosures, QE one after the other….anything to kick the can down the road.
“…Banks could make more money by selling to pools of investors who would then rent out the homes. ‘I don’t think we’re going to see a sudden deluge of properties,’ said Goldman.”
It’s quite astonishing how many too-clever-by-half investors stand to make a killing by purchasing single-family homes and renting them out to a broke populace!
‘Hedge fund manager Bruce Rose was among the first investors to coax institutional money into the mom and pop business of single-family home rentals, raising $450 million last year from Oaktree Capital Group LLC. (OAK) Now, with house prices climbing at the fastest pace in seven years and investors swamping the rental market, Rose says it no longer makes sense to be a buyer.’
‘We just don’t see the returns there that are adequate to incentivize us to continue to invest,” Rose, 55, chief executive officer of Carrington Holding Co. LLC, said in an interview at his Aliso Viejo, California office. “There’s a lot of — bluntly — stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.’
‘Carrington may start buying rental homes again when other large investors decide to sell after learning they can’t make returns that justify the prices they paid, Rose said. “We’ll sit back in the weeds for a while and wait for a couple of blowups,” he said.’
http://www.bloomberg.com/news/2013-05-29/carrington-stops-buying-u-s-rentals-as-blackstone-adding.html?cmpid=yhoo
‘(Reuters) - Worries the Federal Reserve may begin to slow its stimulus efforts sent U.S. mortgage rates last week to their highest level in a year, drying up demand for home refinancings, data from an industry group showed on Wednesday. The Mortgage Bankers Association said interest rates on fixed 30-year mortgage rates surged 12 basis points to average 3.90 percent in the week ended May 24. It was the highest level since May of last year and the biggest jump in 14 months.’
http://finance.yahoo.com/news/mortgage-rates-surge-fed-tapering-134408221.html
^^^ THIS ^^^
In spades. I read the same article over on Zerohedge. I’m telling you kids- it takes a long time to turn a battleship around, but one can capsize in mere minutes. The ’smart money’ is already leaving the scene of the crime. When the stupid money finally gets the first whiffs of smoke in this crowded theatre, the stampede for the exits will be absolutely brutal. There will be tales of horrific losses, investor savagery and real estate buggery as these amateurs gnaw off their own limbs trying to escape the traps they set for themselves. And it will happen sooner and faster than anyone will want to believe. Watch.
Then there was this lovely bit in the LA Times about a week & a half ago:
3 Big Banks Nearly Halt Foreclosure Sales After U.S. Tweaks Order
In early May, Wells Fargo, Chase & Citigroup hit the pause button on foreclosure sales. I’m sure it’s just a crazy coincidence that states with the most foreclosures (California, Nevada, Arizona) also saw the biggest price increases as the foreclosure pipeline temporarily ground to a halt.
http://www.latimes.com/business/money/la-fi-mo-banks-foreclosure-halt-20130517,0,4350791.story
‘Before dawn one hazy March day in L.A., Armando Granillo pulled his SUV into a Starbucks near MacArthur Park, where he planned to pick up an envelope full of cash from an Arizona real estate broker, federal investigators say. Granillo, a foreclosure specialist at mortgage giant Fannie Mae, expected to drive off with $11,200 — an illegal kickback for steering foreclosure listings to brokers, authorities allege in court records.’
http://articles.latimes.com/2013/may/27/business/la-fi-fannie-mae-kickbacks-20130525
This part reminds me of the drug dealers office in No Country For Old Men;
‘Granillo worked near John Wayne Airport in a high-rise whose lobby has no listing for Fannie’s eighth-floor office — a safeguard to prevent disruptions from foreclosed borrowers and other disgruntled members of the public, Carter said.’
That was one of my favorite parts of the book, because it contained this statement by the Chigurh character:
“The prospect of outsized profits leads people to exaggerate their own capabilities. In their minds. They pretend to themselves that they are in control of events where perhaps they are not.”
Fear drives many decisions in life should we or shouldn’t we, you must decide what is best for you and not make decisions based other people’s fear or hesitation?
Fear drives many decisions in life ??
So does Greed….
‘Rising Mortgage Rates, Home Prices a Lethal Brew’
‘The 30-year fixed mortgage hit a record low rate of 3.47 percent in December of last year. Even though it is still well below historical norms, this small rise is already taking its toll. “In my world it’s clearly slowing the market and pricing. Right now I have properties that are well-priced yet sitting on the market unsold,” said David Fogg, a real estate agent in Burbank, CA. “Should rates continue to rise, values will likely soften.”
http://finance.yahoo.com/news/rising-mortgage-rates-home-prices-143020661.html
I’m a fan of rage-based decision making, myself.
What is there to fear in housing prices collapsing to dramatically lower and more affordable levels?
?????
What is there to fear in housing prices collapsing to dramatically lower and more affordable levels?
Because with 40%+ of mortgage holders effectively under-water, it would mean instant insolvency for the banks if people don’t keep sending in their monthly payment.
Effectively under-water meaning insufficient equity/income/both to sell one house and qualify for a loan on a replacement house.
Just because the majority of deluded homedebtors are underwater doesn’t mean they’ll stop paying. They would have done so by now anyways. Although if they were smart, they would stop paying.
‘it would mean instant insolvency for the banks’
This was the path chosen by people other than posters here. It’s a small problem compared to what we face, IMO.
See, in the HB part two, or whatever you want to call it, this is the happy phase. The grass seems greener, the sky bluer and the air sweeter. Anyone who thinks it can’t last or something bad might result is a kook, a doom and gloomer, and probably not much fun at parties.
Since we just saw the movie, consider how the replay may work out. People lose jobs; a lot of jobs. And the familiar themes begin; “Jack and Jill loved their house and it was cheaper than renting. But then the economy went south, Jack lost his job and…”
So we’re still facing the same problem when DC decided it could paper over the bubble; jobs. To heck with the banks. If we had told them to pound sand years ago, we’d almost be out of this mess by now.
To heck with the banks. If we had told them to pound sand years ago, we’d almost be out of this mess by now.
Yes we would. But instead we “saved the system”.
The system that enslaves the majority of the population.
Who knows what they’d get up to if they had any freedom?
insufficient equity/income/both to sell one house and qualify for a loan on a replacement house ??
Not sure why but I never gave much thought to this perspective..
They like/love where they live…
Their monthly cost is basically fixed other than maintenance
Maybe the kids are in good schools or have many friends
Maybe their credit is trashed
So is the conclusion for them, I am underwater so what ?? Is it the perspective that I am basically renting my house and I will never have a landlord tell me to leave…Kids will be able to finish school here…I know and like my neighbors…I can afford it ??
I wonder just how many underwater homeowners may have come to that conclusion…
If you believe that everything (almost) in life is cyclical, why not sit back and enjoy a predictable and affordable payment until you own it fee simple?
Since when is paying twice monthly rental rates considered affordable?
You realtors are such liars.
The majority of people who could make the payments but were going to walk anyway already walked. Those who stayed had a reason to stay…any number of the reasons you note.
People who bought their home as a place to live are not motivated in the near term by price movement other than whether they feel “good” about their life situation (less apt to save, more apt to spend), or “bad” about it (more apt to save, less apt to spend).
The question asked in EITHER case of a) walking away or b) selling for a profit is “Where will my family live now?”.
If the answer isn’t a good one (poor rental pool quality/alternatives, disrupt family’s life, longer commute, other decrease in quality of life, etc.), you simply keep making the payments and living your life.
Oh, the fear debate. Yes! I love the fear debate. This is awesome. We are BACK to the same conversation as before.
http://finance.yahoo.com/news/rising-mortgage-rates-home-prices-143020661.html
“Banks could make more money by selling to pools of investors who would then rent out the homes. ‘I don’t think we’re going to see a sudden deluge of properties,’ said Goldman.”
If banks wanted to sell to pools of investors, they would have done that a long time ago, back when the prices were even higher. Besides, what is a pool of investors? I think he meant to say that banks would sell pools of houses (bulk deals) to investors.
Now here’s a novel concept:
If City Hall decides it can benefit by seizing your property through eminent domain, then it will. If you are a lender, then it may seize your notes. It’s for the public good. If you have a long car that takes up too much space on the curb, iminent domain! The city could actually use tax-payers’ money to buy anything and everything it wants for any reason at all. As long as the majority of members agree, then they can TAKE anyone’s stuff for any reason!
That should definitely increase confidence in the house market.
Reading this post I feel like I just stumbled back in time on HBB to June 2005. It’s like a bad dream that keeps returning and you’re not sure why.
You guessed it: Despite all the crowing about recent San Diego home price gains, prices are lower than they were in 2003 in inflation-adjusted terms. And this is with the help of MASSIVE, UNSUSTAINABLE Federal Reserve funded price support.
HOME PRICES HIT 4.5-YEAR HIGH
San Diego has its 2nd straight month with a double-digit increase in Case-Shiller index
By Lily Leung
12:01 a.m. May 29, 2013 Updated’
4:27 p.m. May 28, 2013
Grace Reyno (left) and Terry Filice walk past a model home as they and other people browse through the new homes at a Pardee Homes community, called Watermark, in Carmel Valley on Sunday. Hayne Palmour IV • U-T
San Diego home prices have reached their highest level in more than 4½ years, according to the S&P/Case-Shiller Home Price Index released Tuesday.
The local market’s index came in at 167.84 in March, the highest since August 2008, according to the monthly report, which has a two-month lag. March prices are up 12 percent from the same time a year ago. That marks the second consecutive month with a double-digit annual increase.
A growing number of buyers are bidding on a tight supply of homes, driving prices higher and helping the housing market recover.
All 20 U.S. metros featured in the report posted year-over-year increases for the third straight month. A dozen of those areas recorded double-digit annual growth, the report said. When looking at the price performance for all 20 cities together, analysts saw the best year-over-year returns in seven years.
Prices rose in Phoenix by 22.5 percent over the past 12 months, the biggest gain among cities. It was followed by San Francisco (22.2 percent) and Las Vegas (20.6 percent).
New York City had the smallest year-over-year increase at 2.6 percent, followed by Cleveland at 4.8 percent.
Does all this data indicate that we’ve completed a national housing recovery? Not yet, says David M. Blitzer, chairman of the S&P’s index committee.
“Other housing market data reported in recent weeks confirm these strong trends: Housing starts and permits, sales of new home and existing homes continue to trend higher,” Blitzer said.
“At the same time, the larger-than-usual share of multifamily housing, a large number of homes still in some stage of foreclosure and buying-to-rent by investors suggest that the housing recovery is not complete,” he added.
San Diego has seen either flatness or increases in home values for the past 14 months, Case-Shiller numbers showed. Local and regional real estate experts have consistently pointed to an inventory shortage and increased buyer demand as key drivers of San Diego’s home values.
The number of homes on the market is near a multiyear low because a sizable share of homeowners are underwater on their mortgages, which means they’re unable to sell. New-home construction has been unable to keep up with demand. Meanwhile, mortgage rates are near historic bottoms, making real estate more affordable for buyers.
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Would you consider an investment which appreciated in nominal (not inflation-adjusted) terms from a level of 157.75 in March 2003 to 167.84 in March 2013 to be a good investment?
The annualized return on this is ((167.84/157.75)^(1/10)-1)*100 = 0.62%. Unless inflation was below 0.62% a year for the past ten years, this investment was a money loser, and I haven’t even brought in the high transaction and carrying costs into the calculation.
GUESS WHAT INVESTMENT I AM TALKING ABOUT
:-)
You guessed it! Those figures are the levels of the Case-Shiller index for San Diego in March 2003 compared to March 2013. Anyone who bought a house in San Diego in 2003 or later has lost alot of money — ALOT!!!!
REITs were a really bad investment if you bought in 2005 and measured performance to 2009. They were a really good investment if you bought after the crash in 2009 and held until today.
In other words, timing is everything sometimes about what makes a “good investment” or a “bad investment”.
In any event, are you saying that on an inflation adjusted basis, SD is below 2003 prices?
What does that say to you about how much farther the rebubble can go before it pops?
The handy dandy inflation calculator from BLS says that 157.75 in 2003 should be 199.36 in 2013.
199.36/167.84=119%
So, prices would need to be 19% higher than today to just get back to the inflation adjusted levels of 2003…and things went crazy for another 3 years following the levels hit in 2003.
So, how much longer do we rebubble before we crash again?
Do most real estate investors realize how much money they stand to lose if they fail to sell before the Fed gets serious about winding down QE3? The losses will be epic!!!
My big question: Who is going to bail out the Megarich in the next real estate crash?