How Bad is the Housing Slump out West? This Bad:
"The number of contracts [for new homes] signed in the fourth quarter fell the most in [luxury homebuilder] Tolls West region of Arizona, California, Colorado and Nevada, where orders tumbled 87 percent."
And, judging from its stock's performance, Toll is perceived to be one of the healthier builders.
Now that I'm a homeowner no "you're just a bitter renter" comments, okay? I can't say that owning a home has made me any more sanguine about the housing market's near-term prospects.
Hope you like your house.
But most of the true speculation here was in condos, not SFHs, unlike in Vegas, Phoenix, etc., so you won't see 87% declines in new luxury home sales here.
Maybe first time home buyers will be able to get started for less than they would have a year ago, which is a good thing. But current home owners who want to move aren't going to be in a position to gain, unless perhaps they are planning to buy something more more expensive than what they have been living in until now. And unless home purchasers are prepared to pay all cash they are likely to pay more interest to finance those homes. (If you could have borrowed at 5.25% on a 30-year "jumbo" loan, one for <$417K, a paltry amount in many markets, it might be 6.57% now, and still more later. When paying an additional 1.5% or more in interest on your mortgage, the savings realized with a lower purchase price erodes over the course of not so many years.)
What is really worrisome, though, is how much more than the housing market this credit crisis may go. Are your pension funds at no risk of disasterous losses through investments in CDOs, SIVs, various types of exotic derivatives and still more exotic and leveraged derivatives of derivatives? How about those insurance companies we count on to have the money to pay claims, pay annuities, pay on the mortgages and bonds they have insured, etc.? Money market funds will never be unable to keep the $1 share fix we take for granted like the sun rising each morning in the East and setting each evening in the West?
You may see no crisis or "crisis in this crisis"(?), but that doesn't mean the one of enormous magnitude is not upon us. Hopefully, it won't hit us like the Pacific tsunami that unleashed such devastating force so quickly only a few years ago and we will muddle through it. But this won't be a repeat of the Y2000 threat that proved so inconsequential in the end.
That said, I have little sympathy for those who bought houses they could not afford. I have no problem with mortgage companies giving relief for those who are trying. In the recent housing craze, people seemed to forget that the primary purpose of buying a house was to provide shelter, not as a commodity to be "flipped" for easy profit after a short period or as a "golden egg" investment vehicle.
SMART money buys when people hate it, and sell when people love it. i don't care WHAT asset you are talking about, that's how you find value.
the signs of the housing top were clear to anybody with their eyes open, but "panic buyers" always buy a top. not a problem in real estate if you don't overleverage, but ask any futures broker... the #1 cause of trader failure is overleveraging, why should real estate be any different.
it's no crisis, any more than ridiculous overinflated prices were a crisis. it's called a correction in prices, and that's a great thing, especially if you are cash rich with good credit.
this bailout/freeze thing is disgusting. talk about perverse incentives. responsible people who honor their contracts, didn't overleverage, etc. are getting hosed by this bailout because they acted responsibly and the irresponsible are being rewarded.
when i bought a house in seattle in 1999 my realtor totally pimped a 300k house as easily affordable for me and a "you can't lose" investment. here's a hint, ANY investment that offers opportunity beyond t-bills also has risk.
i bought a 190k house, put 50k down, and recently sold for 310k. so im happy. i will wait, with cash on side for the panic to get REALLY bad, and THAT's when you buy.
the signs of the real estate top: CNBC interviewing vegas strippers making a killing as real estate speculators, guys walking around downtown renton with sandwich boards advertising mortgages.
ridiculous.
fear, panic, greed , euphoria, herd mentality, and even the occasional black swan. these are what create opportunity in markets.
the JOB of markets is price discovery, risk transference, etc.
not to protect morons who bought overpriced houses, on ridiculously overleveraged financing because "it HAS to go up ... its real estate"
How can I get in on these bail-outs? I kept a fixed-interest loan, but if I'd taken a variable rate loan that was really a fixed-rate my payment would be less than it is.
I've been wondering, is there any correlation between the higher bar to bankruptcies and the increasing foreclosures? In the past a debtor might have been able to write off his unsecured debt and re-affirm his mortgage; now that's much less of an option. (And where is all the easier, cheaper unsecured lending now that the risk to creditors of bankruptcy is so much lower?)
(I'm not a bitter homeowner, I'm just bitter.)
Bail them out, I say!
You think someone who refers to George W. Bush as "our Mexican President" is a Dailykos reader??? Which alternate universe are you visiting from?
One thing you probably won't see in the press, is that a good chunk of those getting relief will be illegal aliens. Who else do you think got those ridiculous loans? So not only are we paying for their kids to go to school, their healthcare, and a gaggle of other social services, now we get to bail them out of their mortgages.
Bail them out, I say!"
you don't have a right to have your property value go up. let the frigging market decide.
perverse incentives SUCK. i got a 15 yr fixed (rolled from 30 to 15 yr when the rates dropped). banker said that almost nobody got 15 yr mortgages when i got one. that's another sign that ridiculous overleveraging and creative finance was rife.
a home is (for nearly everybody who buys one) the single largest investment (by a factor of several times) a person will make, yet i am supposed to feel sorry for people who didn't do basic research into how financing, leverage, and ARM rollovers work?
or that real estatee is NOT guaranteed to go up, but can (and has in the past) dropped over 30% in a matter of several years?
or that leveraging magnifies losses JUST as it magnifies gains depending on price direction?
or that buying into any bull market that has been stampeding for years and years is risky?
or that the market cannot sustain the levels of home ownership (demographics that never owned before now owning, record # of second homes, record # of speculative purchases, ) etc. etc.
just troll the lefty boards ... it's ALL evil corporations fault!
Of course, on the opposite side we have references to "our Mexican President"--and an implication this is all Bush's fault. It is amazing how delusional people on the left and right often spout the same inanities even if they are pointing to different bogeymen.
I wanted to control my housing costs, so I scraped up every bit of cash I could for a down payment and closing costs. The furniture we had in the apartment was good enough. Besides, furniture depreciates to nothing right away. Would you buy someone's used couch? I've had to pay to have them hauled away. But after a few years, your bank account heals, and you can upgrade your furniture. And as far as fun goes, with the money you have left you can go to the hardware store and the nursery, and personalize your new home: plant a garden, paint the walls, etc. Invite people over: The best parties I had were not remarkable for their furnishings.
College students often buy such things.
I speak from experience.
If you to do a little research on the Hope Now Plan, you will find that it covers a very small slice of the borrowers in distress. That’s why the Democrats say the “plan doesn’t go far enough.” For example see the column by Jessie Jackson in today’s WSJ. Or look at the remarks by Bill Clinton, Barney Frank, etc. I get my information from Tanta at the Calculated Risk blog site. Tanta is a mortgage underwriter who publishes extensively on this topic.
“ … you just might meet some working couples who earn just over a $100,000 per year…”
Is it your position that the $100,000 income couple can afford to purchase a $700,000 house with no down payment? A rough rule of thumb is three times your gross income. They don’t even come close.
“Finally, less factories are needed because worker productivity has increased since the 1970s.”
Is that why we the US is essentially out of business in most key goods producing industries? You talk about getting out of the house. Why don’t you take a trip to the nearest mall and note virtually nothing for sale there is made in the US.
Finally I called Bush the “our Mexican president” because he supports economic unification with Mexico. He continuously refuses to protect the southern, border and remains silent when the real Mexican president makes statements challenging the US sovereignty.
If you live in the right towns, there's definitely a used furniture market.
Why do you think I paid to have my couch hauled away? Goodwill and the Salvation Army didn't want it, even for free. Used furniture has to look brand new for them to take it.
The best parties were, however, the ones where remarkable things happened ON the furnishings... so it's best to have some.
Postponing default and foreclosure as long as possible is probably the only prudent move the administration can make but I think this means the entire revaluation of houses could go on for a long time.
Earlier this year, I bought a house, a new construction. I had to sign a contract that I would not sell or rent the house for one year, and that it would be my primary residence. And I am glad they forced me to do that.