Poll:Let the housing market collapse

[LOL!]

http://www.nytimes.com/2010/09/06/business/economy/06housing.html discusses helping current owners or future owners. I think that many current owners would not be hurt by a collapse in the housing market. Only owners who bought in the last 5 years or so would be hurt. Many folks have owned their homes longer and have not used their homes as piggy banks.

To get a pulse on this, a poll.

Would you be harmed significantly by a collapse in the housing market? For this poll, a collapse would be a 30% drop in the value of your home. If you don't own a home, you can answer no.

A 30% drop would change the value of our house back to when we bought it in 1994.

 

[73ss454]

I was hoping my house would continue to go down in value so my property taxes would drop. Well, the house depreciated and the taxes went up, go figure. The government just changed the tax rate to fit their needs.

 

[bssc]

Live in Phoenix so the potential value of what we could have sold the house for has dropped significantly but the estimated value is still above what we paid for it. Taxes actually went down $100 but I am sure that the government will increase the mils to fix that gap.

 

[Nick59]

Would it sting? Sure. Would it put me in any trouble? No.

As stated elsewhere, bought in '93, paid off a couple years ago, now have minimal (~9%) equity drawn.

I'm a little fascinated by the statement in the article about the home buyers' tax credits that cost ~$30B, "much of which went to people who would have bought anyway."

I think that we need to move further away from national policies that stimulate home ownership.

I also think that the housing market will only stabilize when the general economy rebounds; I don't think attempts to stabilize the housing market will have much impact on the general economy.

 

[LOL!]

I guess if housing collapsed, then the stock and bond markets would collapse as well. I would be hurt by that.

 

[Texas Proud]

Well, I bought last year and got a great deal... It could go down 10% to get to where I paid....


One thing wrong with the poll is it assumes that the RE where I live actually went up to sky high values... they did not.. so we should not get hit with as big a percent drop if they let the housing market drop to the correct level.. we are there..... at least here...

 

[NW Landlady]

LOL, I am not quite sure of your point of reference. Most of us have already experienced a drop in value of 30% since 2007, so do you mean another 30%?

I am not buying (what is said in the Article) that everyone will just abandon their houses & mortgages because they are underwater. Foreclosure isn't fun & trashes your credit rating. Plus, you have to live somewhere -- we certainly can't/won't all become renters with bad credit from foreclosure or is that the future implied here?

On another note, although this may just be a statistical blip, but the Residential Rental Market has IMPROVED significantly over the past quarter & earlier than the Industry predicted (it was in the Toilet pretty much for all of 2009/early 2010). This is NATIONWIDE -- although I must say it has been very good locally in my jurisdiction. (I know peeps will think immediately that this is because of all the foreclosures, but that is only a small part of it, 2009 was the worst rental market Nationwide in over 20 years & at the height of home foreclosures.) The reason given by the statisticians (I am not saying this is true, just what my trade rags say) is that people are in fact starting to get back to work (you need the income to pay rent) plus people are not able to buy houses as easily or have had foreclosure.

One significance of improved rental market is that at a minimum, your home value will be worth something relative to its rental value. I just don't buy that total collapse is imminent. And if Rents go Up (as they are currently), this hopefully should have a dampening effect in many regions on the potential drop in house values.

If you live in the Boonies or own an overpriced McMansion however, please accept my condolences.

 

[LOL!]

LOL, I am not quite sure of your point of reference. Most of us have already experienced a drop in value of 30% since 2007, so do you mean another 30%?

Yes another 30%. I'm guessing that "most of us" have not experienced a 30% drop already in the value of our homes. My home is at the highest value it has ever been (it's value has never paced inflation). Once you get away from California, Florida, Phoenix, and perhaps New York, then I propose that homeowners who bought more than 5 years ago are mostly doing OK and that includes the Boonies. Unfortunately, the national media is centered in NY, LA, and Washington, DC and reporters tend to report what they see which is not what I see.

 

[calmloki]

Dang it LOL, I'd prefer to divest of the properties and do something other than landlording. At present selling is more difficult than continuing to own and rent out - and would net a bit less. Guess I'll just keep raking in the rents and become the stereotypical 70 YO landlord driving a POS car and landpoor. Gonna take up cigar smoking so i can spit tobacco bits on the floor like Mr. Garcia did when he collected rent from me in Santa Fe back in '76.

 

[MichaelB]

Wow. Another 30% would be hard on banks and other holders of MBS. Financial system impact might cause more damage to portfolios than loss of home value.

If it did happen, I would move a big chunk of my portfolio into real estate.

 

[NW Landlady]

Yes another 30%. I'm guessing that "most of us" have not experienced a 30% drop already in the value of our homes. My home is at the highest value it has ever been (it's value has never paced inflation). Once you get away from California, Florida, Phoenix, and perhaps New York, then I propose that homeowners who bought more than 5 years ago are mostly doing OK and that includes the Boonies. Unfortunately, the national media is centered in NY, LA, and Washington, DC and reporters tend to report what they see which is not what I see.

I would be more curious to get a poll on that issue (% of house value drop), as I am not as confident that this is the case. (But KUDOS to you that you have not been adversely affected.) I know there are regional hot spots where housing is still good, but many places I have looked into are having "fire" sales in their RE Market.

My reference to homes in the "Boonies" simply implied that they would be less affected by the bolstering of the rental market and generally are higher risk rentals/less desirable to tenants as they are further from places of employment.

I also think that the housing market will only stabilize when the general economy rebounds; I don't think attempts to stabilize the housing market will have much impact on the general economy.

ITA with this thought!

 

[NW Landlady]

Dang it LOL, I'd prefer to divest of the properties and do something other than landlording. At present selling is more difficult than continuing to own and rent out - and would net a bit less. Guess I'll just keep raking in the rents and become the stereotypical 70 YO landlord driving a POS car and landpoor. Gonna take up cigar smoking so i can spit tobacco bits on the floor like Mr. Garcia did when he collected rent from me in Santa Fe back in '76.

CALMLOKI!! I don't believe it about being land poor....
JUST DO IT! SELL EM ALL!!

 

[Nick59]

I would be more curious to get a poll on that issue (% of house value drop), as I am not as confident that this is the case.

That would be interesting.

Using my county's online real estate assessment database as a source [objective], as of 2010's assessment, the assessed value has dropped just north of 20% since 2006's high.

 

[LOL!]

Using my county's online site:
2006 100% (a very good protest year for us)
2007 109%
2008 109%
2009 110%
2010 110% (a comparable house sold for near this amount last month)

I would not call a 10% gain in 4 years a regional hot-spot nor even good.

 

[avengerki]

I currently have about a 13% drop up from a 20% drop a year ago. Still underwater though on my mortgage, but I want to refinance. (I don't want to refinance for the current value I just want to refinance what I owe and lower the interest rate.)

 

[Nick59]

I would not call a 10% gain in 4 years a regional hot-spot nor even good.

It's all relative and a matter of perspective...I'd gladly swap my 20% drop for your 10% gain!

 

[FIREd]

Our home value would have to fall about 40% before we would get upside down on our mortgage. Even then, the value of our other investments dwarfs the amount we owe on the mortgage so we'd still be just fine financially.

In our area, RE prices have not fallen much. MIL bought her house in 2007 for $185K. We will know her home's current value this week as it is being appraised for a reverse mortgage. But based on neighborhood comps, I would expect her home value to have stagnated or increased slighlty since 2007. A house similar to hers sold for $218K last month on the next street over. Based on county tax appraisals, her home increased slightly in value since 2007.

 

[harley]

Using my county's online site:
2006 100% (a very good protest year for us)
2007 109%
2008 109%
2009 110%
2010 110% (a comparable house sold for near this amount last month)

I would not call a 10% gain in 4 years a regional hot-spot nor even good.

Actually, I believe this isn't too far off the amount Robert Shiller says is the average long term gain for real estate, 2-3%/year.

I'm personally down about 35% from the build value on my home. We built at the absolute top of the market in a resort area, and I suspect it will be many many years before we would ever break even. Especially since we overbuilt in many aspects, for our own satisfaction and in ways that we never expected to make the money back on (geothermal hvac, marine grade subfloor, conditioned crawlspace, etc). Not a big deal, though. We've made a ton of money over the years whenever we've moved, so if we take a loss next time we'll probably still be ahead. But another 30% decrease would be pretty devastating. That would take us down to less that 50% of what we spent. It wouldn't put us underwater, or really in any financial difficulty, but it would suck emotionally.

Our next door neighbors have their house on the market. It's down 25% from what they originally listed it for last year. I think it's still a little high, because their original price was obscenely high. But I'm hoping they sell. It would at least give us a comp, since there hasn't been any activity here in the last couple of years. And if they get anywhere near where they are asking I'll be quite happy.

 

[Purron]

This would be a bummer even if you don't plan to sell your house or try to access equity. More bank failures, more people out of work, more stress on the overall economy. Hurts everyone. Not good. The savings in lower real estate taxes would, IMHO, be more than offset by other negatives.

 

[NW Landlady]

LOL - Maybe you just need to add the Northwest to your list then.

I have been positively influenced by this forum & have been in process of selling some of my properties to retire -- as example a duplex & single family home. But every time I have gotten a realtor market analysis, they have come in much lower than the County Assessed Value. This is because the market is artificially affected by Short Sales/Bank Owned homes and those are under priced and the first to get snapped up by smart home buyers.

Example #1: Rambler 3BR/1BA - 15 mins outside downtown Seattle. Market Value 2007 -- approx $230K. County Assessors Value 2010: $178K. Actual Market Value per Realtor: $150K - 160K. A review of listings online showed many short sales/ bank owned available & competing. (This makes the house the worse perfoming property in my portfolio from an appreciation standpoint. Can't win 'em all!)

Example #2: Wonderful In City Duplex (BEAUTIFUL BALLARD!!) - County Assessed Value & Market Value 2007 was $550K. 2010 County Assessed Value was $484,000 which I would have been happy with to no end. Realtor Current Market Value: $399,000 - and then it would take months to sell. Realtor reason: Not many peeps are buying these, maybe One Ballard Duplex a Month might sell & the market is overloaded...Realtor states Value may drop even more.

So I would say our "REAL" market (versus County Assessor value) has dropped at least 30% in the past few years. That's the down side you get for riding the bubble.

 

[JOHNNIE36]

I voted "no" in the poll. Below references are all in the Tampa area.
Bought in 1998 for $121,500. Paid off mortgage in 2003.
Sold in 2006 for $310,000. Had to be at the height of the market.
Bought another house in 2006 for $125,000 cash. Rented out in 2010-couldn't sell.
Bought our last house 12-30-09 for $205,000 cash. Bottom of the market.
We have no intention of ever selling as we plan to live out our days in this house which we gutted and completely remodeled (built in 1993 for $180,000). So, my feelings are that no matter what happens to the housing market, it won't affect us. The value of the house upon our deaths will be what the kids get.

 

[Purron]

I voted "no" in the poll. Below references are all in the Tampa area.
Bought in 1998 for $121,500. Paid off mortgage in 2003.
Sold in 2006 for $310,000. Had to be at the height of the market.
Bought another house in 2006 for $125,000 cash. Rented out in 2010-couldn't sell.
Bought our last house 12-30-09 for $205,000 cash. Bottom of the market.
We have no intention of ever selling as we plan to live out our days in this house which we gutted and completely remodeled (built in 1993 for $180,000). So, my feelings are that no matter what happens to the housing market, it won't affect us. The value of the house upon our deaths will be what the kids get.

Johnnie36:

This is your own personal buying and selling history plus your plans to sell (or not sell) RE you own. Doesn't the overall condition of the RE market impact all of us regardless of our plans to buy, sell or hold?

 

[samclem]

The government has wasted a ton of money artificially propping up the price of homes. Result: We now have a one year inventory (slide7) of unsold homes on the market (up 40% from a year ago).

Let the market set the price. Who is to say what the "right" price for a house is? Ultimately, only the most interested buyer and the seller know.

 

[LOL!]

I'm trying to think of a way that a government handout would help me. I have a mortgage, but my home value is not underwater. My interest rate is very low, so I get no benefit from a refinance. I am able to deduct my mortgage interest. I am not selling my house. So what can the government do for me?

I see all this help for others. If the government would prop up the yield paid by my GNMA fund to above market rates and guaranteed that the value of my fund shares would not drop, then I would invest more money in GNMAs. Or perhaps make the dividends from the GNMA fund tax-exempt. Yes, that's the ticket: Support higher yields on my fixed income investments without causing the NAVs to drop.

 

[W2R]

http://www.nytimes.com/2010/09/06/business/economy/06housing.html discusses helping current owners or future owners. I think that many current owners would not be hurt by a collapse in the housing market. Only owners who bought in the last 5 years or so would be hurt. Many folks have owned their homes longer and have not used their homes as piggy banks.

To get a pulse on this, a poll.

Would you be harmed significantly by a collapse in the housing market? For this poll, a collapse would be a 30% drop in the value of your home. If you don't own a home, you can answer no.

A 30% drop would change the value of our house back to when we bought it in 1994.

I think (but this is not confirmed by a realtor yet) that my house is presently worth about what I paid for it back in 2002.

My mortgage is paid off, though, so I voted that a 30% drop in real estate prices would not "hurt" me.

I hope that I understood the question correctly. Since I plan to downsize and add the difference in prices to my portfolio, I wouldn't be happy about such a drop in housing prices. If both dropped 30%, then the difference would drop accordingly. I wouldn't need or want help from the government though.