Real Estate Crash thread

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Originally Posted by Tips^Up

I'm looking at the typical first-time homebuyer money and this is what my realtor just sent to me. Interesting, in my price range, it is a SELLERS market.

1) Denver home values increased for the 4th consecutive month in June (we are still compiling data for July and August but the numbers look good)!

2) Two million first-time home buyers will have taken advantage of the $8000 tax credit by the end of 2009. ARE YOU A FIRST-TIME BUYER STILL THINKING ABOUT PURCHASING A HOME? IF SO, NOW IS THE TIME TO ACT. AS OF 11/30/09 THIS CREDIT GOES AWAY WHICH MEANS YOU SHOULD BE SHOPPING NOW!

3) The national inventory of homes on the market has decreased almost 11% from the same time last year. Denver inventories are down 20-30% depending on the neighborhoods where you may be looking to purchase a home! Less inventory, more buyers and still historically low interest rates equates to a seller’s market in many areas (believe it or not)!

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Did your realtor send you this too?

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Any optimists touting a housing recovery might want to pause and think about this: Amherst Securities Group analysts believe the market faces another major hurdle because about 7 million properties that are likely to be seized by lenders have yet to hit the market.


The "huge shadow inventory" reflects mortgages already being foreclosed upon or now delinquent and likely to be and, assuming no other properties are on the market, it would take 1.35 years to sell this inventory based on the current pace of existing-home sales, analyst Laurie Goodman wrote in a note to clients.


In 2005, there were 1.27 million properties in the same situation.

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Originally Posted by Benny Profane

....My parents and their contemporaries would've considered a second mortgage an insult to their life's financial goals, one of which was to pay off the house as soon as possible. .....

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...seems like this is the new "life's financial goals" also. At least for me, that's the number 1 financial priority going forward. Not really looking to buy cheap real estate and try to flip it, not trying to make money in the stock market...just pay off the freaking house(s). So, the banks are gonna get fucked either way. Either people walk on their loans, or people pay them off and don't look for any more home loans....ever.

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Originally Posted by Toadman

Did your realtor send you this too?

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And then, you also have to consider the "shadow inventory" of millions of homes kept off the market just waiting for the prices to come back to, oh, '06, '02, or even '99 levels. They'll have to sell sooner or later. Or the estate sale will take care of that.

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Originally Posted by DictatorShooter

...seems like this is the new "life's financial goals" also. At least for me, that's the number 1 financial priority going forward. Not really looking to buy cheap real estate and try to flip it, not trying to make money in the stock market...just pay off the freaking house(s). So, the banks are gonna get fucked either way. Either people walk on their loans, or people pay them off and don't look for any more home loans....ever.

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I disagree. Leveraging is one of the oldest tricks in the book for building wealth, and as long as the tax benefits remain, having a home mortgage is one of the easiest and smartest ways to do it.

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Originally Posted by DictatorShooter

...seems like this is the new "life's financial goals" also. At least for me, that's the number 1 financial priority going forward. Not really looking to buy cheap real estate and try to flip it, not trying to make money in the stock market...just pay off the freaking house(s). So, the banks are gonna get fucked either way. Either people walk on their loans, or people pay them off and don't look for any more home loans....ever.

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Just paying off the house won't do much for your retirement plan. The days of pensions are about over, social security is fucked - unless you've got some other assets paying you cash then having your house paid off is just one less bill and you've gotta keep working. I don't even want to wade in to the murky waters of 401ks and the future of the stock market with the baby boomers pulling their money out - that's dark territory. Seems to me, real estate is still going to be a good bet moving forward (though it has changed as an investment) and banks are still going to be a big part of the financing of real estate.

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Originally Posted by khakis

Leveraging is one of the oldest tricks in the book for building wealth, and as long as the tax benefits remain

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Well, there you go. Bernancke loves you, and needs you.

Obviously, your parents are much younger than mine. Boomers?

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Originally Posted by Benny Profane

Let me guess - that new job you got in Denver is selling real estate or mortgages, right?

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close, pizza delivery

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Originally Posted by Benny Profane

Well, there you go. Bernancke loves you, and needs you.

Obviously, your parents are much younger than mine. Boomers?

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Yes, but they are very conservative financially, and about all they ever taught me about finances was to not get into credit card debt.

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Originally Posted by Hutch

Typical objective analysis from an agent. "BUY NOW OR YOU ARE AN IDIOT!"

Sellers' market my ass.

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Even the strongest markets have taken a hit. Its not even close to becoming a sellers market. In the cities, too many hi-rise condos were built. In the suburbs, too many of those new 'cram as many as you can' subdivisions. Rates are low, but its going to be a while until prices appreciate if it all. Of course, they may be a few exceptions. Remember when your friends were getting 0% down interest only mortgages just a few years back? Well, I wonder if they are upside down in their homes? ;)

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Originally Posted by Tips^Up

close, pizza delivery

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I can't tell if he's serious or just taking a shot at Benny.

Everything goes in cycles. The generation who struggled during the great depression scratched and clawed to make a buck, their children vowed that they would live better than their parents did, and busted their ass to build this nation in the post war era. The next generation followed their example and tried to create a better quality of life for their children, but had to take on more risk to do it. The cycle of wanting to "live" better than your parents did had to blow up at some point. And here we are. It will all happen again.

As far as it being a sellers market in Denver. Well, there is a lot of activity below a certain price point, but sellers aren't exactly making a killing. A buddy of mine is shopping for a house and since he is out of town for work a lot I have been helping by scouting out houses. He has been outbid on 3 houses so far and today is putting an offer on a nice place sight-unseen because it won't last the weekend. The seller who bought 3 years ago will just about break even not counting any improvements he made.

I don't have anything to add. But this thread was just sitting there at 1499 replies. So here I am.

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Also, on your PMI dropping off comment. I thought you got a FHA loan and I am pretty sure the monthly MI charge does not drop off on that product ever. On a conventional loan, it will drop of when your current loan balance is 80% of the original value (you paid the loan down) or if you have the home reappraised due to appreciation, the lender may waive it at 75% of the value.

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I checked the hud's website, it drops off. But its based on the value i bought it at, i cant have it appraised. So i was wrong about the appraisal it looks like, dammit. Ill have to wait until i hit 78% or 5 years it looks like?

Their site might be outdated or wrong, so if you have info on that, greatly appreciated. That sucks if ill have to pay it the full term. Im sure i could refi at some point, but still...

From their website:


Why does FHA Mortgage Insurance exist?

Unlike conventional loans that adhere to strict underwriting guidelines, FHA-insured loans require very little cash investment to close a loan. There is more flexibility in calculating household income and payment ratios. The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment. In most cases, the insurance cost to the homeowner will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property -whichever is longer.

after 2 1/2 years of waiting. After finally dropping the price and taking a HUGE bath on the price. After having one seller buy then their loan fail. After all of that, I was SUPPOSE to close on our MT house today at 4pm. At 2pm my agent calls, their lender was trying to verify employment one final time, apparantly they had verified twice already but were going to do it once more before close, found out that the buyer was FIRED today! No close and as of now...no deal.

I AM BEYOND STUNNED.

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Originally Posted by cramer

From their website:

Why does FHA Mortgage Insurance exist?
In most cases, the insurance cost to the homeowner will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property -whichever is longer.

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Cramer, it will take a lot longer than 5 years to pay it down to 78% of the original balance making a normal payment. But, you can always refi with a conventional loan once at 80% to have it go away.

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Originally Posted by montanaskier

after 2 1/2 years of waiting. After finally dropping the price and taking a HUGE bath on the price. After having one seller buy then their loan fail. After all of that, I was SUPPOSE to close on our MT house today at 4pm. At 2pm my agent calls, their lender was trying to verify employment one final time, apparantly they had verified twice already but were going to do it once more before close, found out that the buyer was FIRED today! No close and as of now...no deal.

I AM BEYOND STUNNED.

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Damn dude, I am really sorry to hear that. It has been a while, so I don't remember your details, but can you rent it out and not be to far underwater on covering the PITI? I mean if your taking a bath on the price, maybe keep it 5-10 years?

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Originally Posted by montanaskier

No close and as of now...no deal.
I AM BEYOND STUNNED.

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At least your football team is kick ass, that is all that really matters.

They didn't want to approve a loan to a guy who didn't have a job? Shocking.

Good job by the bank is how it looks from here.

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Originally Posted by Egon

At least your football team is kick ass, that is all that really matters.

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LOLZZZZ

Have you tried calling Coach Saban? I'm sure he could help you out.

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Originally Posted by montanaskier

after 2 1/2 years of waiting. After finally dropping the price and taking a HUGE bath on the price. After having one seller buy then their loan fail. After all of that, I was SUPPOSE to close on our MT house today at 4pm. At 2pm my agent calls, their lender was trying to verify employment one final time, apparantly they had verified twice already but were going to do it once more before close, found out that the buyer was FIRED today! No close and as of now...no deal.

I AM BEYOND STUNNED.

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FACK!!!!

++++++VIBES++++++

(...not that it probably matters anyway, something about that story sounds a bit off? I'd wonder if something was a bit "fishy" for a while, and they just didn't clue you in? [/wild guess])

And, for all of you who think the supposed "stabilization" of the housing market is a natural rise in the price cycle, read this and avoid spitting. The right side of your paycheck is keeping dullards and deadbeats in houses they can't afford, and Barney Frank thinks it's just fucking peachy.

http://www.nytimes.com/2009/10/09/bu...09fha.html?hpw

“F.H.A. has stepped into the void left by the private market,” Representative Maxine Waters, Democrat from California, said at the hearing. “Let’s be clear; without F.H.A., there would be no mortgage market right now.”

That was the case for Bernadine Shimon. Like many Americans, Ms. Shimon has recently been through some rough times. She lost a house to foreclosure, declared bankruptcy, got divorced and is now a single mother, teaching high school English in a Denver suburb.

She wanted a house but no lender would touch her. The Federal Housing Administration was more obliging. With the F.H.A. insuring her mortgage, Ms. Shimon was able to buy a $134,000 fixer-upper in August.

“The government gave me another chance,” she said.


Why the fuck 2 people can't rent for a while until they get their shit together is amazing. This woman, after bankruptcy, is spending half of her take home on a mortgage, and the U.S. government is supporting her whole hog. The culture of home ownership is like a fucking disease in our country. It severely maimed our economy a few years ago, and yet, we can't seem to kick the habit. We are fucked.

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Originally Posted by Benny Profane

And, for all of you who think the supposed "stabilization" of the housing market is a natural rise in the price cycle, read this and avoid spitting. The right side of your paycheck is keeping dullards and deadbeats in houses they can't afford, and Barney Frank thinks it's just fucking peachy.

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Why the fuck 2 people can't rent for a while until they get their shit together is amazing. This woman, after bankruptcy, is spending half of her take home on a mortgage, and the U.S. government is supporting her whole hog. The culture of home ownership is like a fucking disease in our country. It severely maimed our economy a few years ago, and yet, we can't seem to kick the habit. We are fucked.

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Good article... but I have a couple comments? First, certainly not every borrower is like your example prior bankrupt lady purchaser. The large majority are more typical borrowers. They do talk about higher numbers (low to mid 20%s) of loans that have "faced serious problems"... but then later say the actual default rate has moved from mid 5%s to mid 7%s in last year. A rise of 2+ percent... perhaps not a shock considering the further lingering economy? I DO THINK that if this current malaise continues another full year or two, which IMHO is GREATER than 50/50 odds at this time, a bunch more shit WILL hit the fan... including for FHA as this article hints at! On the other hand, without the FHA being a big market player right now, that shit WOULD HAVE ALREADY hit the fan, and we'd certainly be in a much bigger hole now than we are.

Damned if you do, damned if you don't, or so it appears? Said another way... Detox is a bitch!

Listen, I have lived a large part of my adult life in and very close to NYC, which is a place I heard recently described as one of the only in America that responsible, fairly high earning adults rent. Yeah, yeah, rent control and stabilization affects that market, but, still, It's a model a lot of Americans should accept - multi use, high density residential areas, instead of this ridiculous sprawl that has grown all over our country like a cancer. It's God-awful for the environment, and, as we are experiencing, highly damaging to our economy. I'm just stunned when I read about people like the examples thy use in this article - I mean, my head almost exploded when I read this: "“I knew in my heart I could not really afford the house, but they gave it to me anyway,” said Mr. Fullenkamp, 22. “I thought, ‘Wow, I’m surprised I pulled that off.’ ”" Holy Shit. I mean, a thousand bucks a month would get you a pretty decent rental for two in Denver, right? But the woman buys an utter piece of shit that she has to clean out the garbage from just to, you know "own". But, she doesn't fucking own it! IT OWNS HER! And I'm fucking paying for this stupidity!

Look at the chart in that article - for God's sake, over 30% of the loans backed by you and me in '07 (07!! one year into this crisis!) have defaulted. One third! And this is OK? Barney Frank can just fritter our deficit away with a little, 'well, hey, it's preventing worse times, so it's OK" bullshit. Fuck, HE isn't paying for it. He'll be rich until his last breath.

Fuck.

We do not rent to people with bankruptcies....its that simple.

...so maybe that's why Uncle Sam sold her a house instead. :)

But I agree with Benny on his adult rental theory, especially now. As someone who's closing on the sale of one place and then purchasing another, when adding commissions, fees, inspections, appraisals, etc....it really adds up. In a market that, in my opinion, will be stagnant for quite a while, I examined the rental choice, but my wife was against it....and she's the boss. :D

NYC is a shithole whether you rent, own or live in cardboard box.

You are missing very much in life, young man. Very much.

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Originally Posted by Benny Profane

You are missing very much in life, young man. Very much.

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I'm sure you remember NYC in the 70's; welcome back!

I drove a cab.

Are you American? It's the greatest American city, still. It's part of you, like it or not.

Living in the dorms was pretty fun, good to see some people never gave up the lifestyle...

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Originally Posted by Benny Profane

The culture of home ownership is like a fucking disease in our country. It severely maimed our economy a few years ago, and yet, we can't seem to kick the habit. We are fucked.

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But if all of us weren't in decades of debt slavery to banks, THEN WHERE WOULD WE BE?

We'd have a nation of people with the freedom to make their own choices in life -- and that doesn't make any money for Wall Street, so it must be discouraged at every level.

(The word "mort gage" literally means: DEATH PLEDGE.)

Our entire system of fractional reserve banking, fiat currency, constant low-level inflation, and tax breaks for home debt is designed to encourage debt slavery. Think about it: if you're not paying interest to a bank, you are useless to them -- so they make sure that savings is taxed, inflated away, and discouraged at every level, while debt is both tax-free and encouraged at every level.

Another example: did you know that capital gains on gold and other precious metals are taxed at ordinary income rates no matter how long you hold them? That's right, the capital gains rules are written to specifically exclude gold and silver -- because unlike every single dollar in our system of fractional reserve banking, gold and silver do not represent a debt to any bank, anywhere. And the bankers don't like that, not one bit.

Originally Posted by Benny Profane
The culture of home ownership is like a fucking disease in our country. It severely maimed our economy a few years ago, and yet, we can't seem to kick the habit. We are fucked.

Benny, most anyone of any real net worth likely made most of it from holding Real Estate for 20+ years. Real Estate allows you to buy a home in the price range you can responsibly afford with 3%-5% down. Say you bought a $200k home 20 years ago. That home today is worth $750k in many cases. As your earnings went up, you accelerated your payments so now after 20 years you have a free and clear home to live in for taxes, insurance and maintenance. Do that with a few homes over your lifetime, with tenants paying your PITI for you and in 20 years your in a very solid position.
Getting in over your head is dumb. Buying real estate is the smartest investment I ever made.

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Originally Posted by liv2ski

Originally Posted by Benny Profane
The culture of home ownership is like a fucking disease in our country. It severely maimed our economy a few years ago, and yet, we can't seem to kick the habit. We are fucked.

Benny, most anyone of any real net worth likely made most of it from holding Real Estate for 20+ years. Real Estate allows you to buy a home in the price range you can responsibly afford with 3%-5% down. Say you bought a $200k home 20 years ago. That home today is worth $750k in many cases. As your earnings went up, you accelerated your payments so now after 20 years you have a free and clear home to live in for taxes, insurance and maintenance. Do that with a few homes over your lifetime, with tenants paying your PITI for you and in 20 years your in a very solid position.
Getting in over your head is dumb. Buying real estate is the smartest investment I ever made.

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Sorry, and, I know you're talking perfectly good sense that worked for a lot of Americans since the end of WW2, but, I'm afraid those days have come to a halt. And, unfortunately, that is the thinking, that, again, is quite valid and made wealth for millions who were smart and responsible with their finances, but blew up the bubble, or, pyramid scheme, if you will, of the housing mania. I call it a pyramid scheme, because it was, in many ways. The top end of the market needed a strong stream of "starter" home owners to keep the buy-up possible, all the while these people in the MacMansions on the Hills made themselves into easy targets for the ambitious and greedy to look up to (baby, someday you'll be parking your Range Rover in front of something like that....). Enter the US government as a cheerleader with tax breaks and easy loans, and, whoops, irrational exuberance. Now, the only people left in the whole daisy chain is the friggin' government and delusional and kinda dumb buyers, who really really have to own a house, no matter what, because........uh....I don't know. Do they actually think they are going to see the appreciation since 1945 or so over the next 50 years? I don't think so. Anyway, you know, that appreciation, averaged out, especially if you delete the bubble years of '02-'06, isn't that hot, anyway. Unless you're rich anyway and bought in Aspen or Manhattan or the Hamptons. But, then, you wouldn't give a fuck.

There's two other problems in your argument. One, most have poisoned the equity in their real estate holdings with stupid easy HELOC debt, basically negating any appreciation - actually, now they're stuck under a debt water line way up there, and, if they're smart, they'll just walk away, which some are doing. The smart ones. Two, there's no way anybody got a home 20 years ago with 3-5% down, and started the ponzi scheme there. If that was the case, this bubble would have popped in 1988.

If you want to somehow envision the next decade, study Japan in the ninties. Yeah, we're different, but the similarities are striking, including the government reactions. It may be a lot worse, even. We are, after all, the largest economy in the world, and the largest debtor nation.

With anything it comes down to smart decisions vs poor decisions. I can understand real estate. I can't understand the stock market.

Will real estate continue to fall in most areas? Maybe. Are interest rates going climb? More than likely. Will we see serious inflation due to all the fake money we're printing? Also more than likely.

I buy houses for less than the sum of the parts. You couldn't build the houses for twice what I pay for them. The deals just keep getting better. The average return we're seeing on new purchases of REOs turned into rentals is 15-20%. And that's paying cash. Imagine what you could do if it was still easy to leverage.

I'm actually noticing a mini-surge in buying in my location. I've talked to quite a few investors who are looking to protect against "hyper-inflation" and are moving in to real estate.

It's going to be interesting to see where this whole financial mess is 10 years from now, but I feel good about where I am and what I'm doing.

Now that the reality that houses aren't going to sell before the "end of the summer", there are some serious discounts going on. There's a house near me that was trashed by renters, just sold for less than the lot would have cost 18 months ago. which is fine if you're going to rent it out or live in it, not so much if you're expecting it to appreciate. Prices are still falling.

I pay my last alimony check on February 1. February 15 I will be eligible to be a "first time buyer" again. I know prices will keep falling through the winter...will they stop falling in the spring?

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Originally Posted by Benny Profane

I drove a cab.

Are you American? It's the greatest American city, still. It's part of you, like it or not.

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NYC is kind of like taking acid. The trip is fun, fast and furious, but not something you're going to do every day or even rush back to anytime soon and the people who do are freaks.

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Originally Posted by meatdrink9

Will real estate continue to fall in most areas? Maybe. Are interest rates going climb? More than likely. Will we see serious inflation due to all the fake money we're printing? Also more than likely.

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As long as real unemployment continues to stay around 15%-16%, I don't think inflation will become a major issue.

Realestate goes up and realestate goes down , its not a guaranteed slam dunk and a 200K house bought 20 yrs ago is only worth 700K when you actualy have the money IN your hand period

I sold out of realestate at THE peak ,made some coin ,5 yrs previous I would have had to throw in some cash to pay out the mortgage so I was happy to gcome out with $$ to follow a woman to a small mountain town ,due to laziness and indecision Its still in cash not the stock market or equities so I look like a fucking genius completely by mistake ... so I don't have to work

I might buy something again if the deal is right BUT when/where is the bottom?

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Originally Posted by XXX-er

I might buy something again if the deal is right BUT when/where is the bottom?

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We're 62 pages into finding the bottom and I don't think anyone is closer to the answer to that question.

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Originally Posted by Platinum Pete

We're 62 pages into finding the bottom and I don't think anyone is closer to the answer to that question.

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especialy the expurts ,the people who basicly got the world into this mess are now the people being asked all the time for a quote on if the recession is over yada yada but I can't see how they would know if they didnt see this all coming

too many domino's falling for anybody to know but I think its still going to get worse

the whole thing has zero effect on me

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Originally Posted by ass-to-mouth

As long as real unemployment continues to stay around 15%-16%, I don't think inflation will become a major issue.

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I think the upcoming lump of Alt-A and ARM defaults are the driving force here, and that employment is more the effect of monetary destruction than the cause. But you are correct that it's tough to inflate with unemployment so high: who's going to borrow the money into existence?

(Note: in a fractional reserve banking system, money is created when debt is issued, and money is destroyed when debt is paid back -- or defaulted on. I know you understand this, a2m, but it bears repeating, because most people never learn it even in college econ class.)

I think the main issue re: dollar strength or weakness isn't domestic money supply: it's the rest of the world's ability and desire to keep financing our trade deficit.