Very Intersting RE Bubble Perspective - The Fool Strikes

[ShokWaveRider]

I hope this is true as I am in the market. But sad for those who need their home equity.

http://www.msnbc.msn.com/id/14608814/from/ET/

SWR

 

[al_bundy]

it used to be that home equity was for big things like renovations and sending kids to college. now people use it to buy things they otherwise can't afford.

 

[haha]

it used to be that home equity was for big things like renovations and sending kids to college. now people use it to buy things they otherwise can't afford.

I would say that if you need your home equity to send kids to college, you can't afford that either.

Ha

 

[SteveR]

Can you say....

"Irrational exuberance?"

Seems I have heard this phrase used once before. Hmmmmm.

The article is dead on.

Many folks bought into the housing boom to upscale using ARMs and then took second mortgages on the "equity" to buy toys and blow on depreciating assets. Now the adjustable rates are moving up by leaps and bounds, there is no equity left to refinance, the refinance interest only payments eat up the paycheck and there is nothing left at the end of the month. Add to that the falling value of their homes and panic is sure to set in soon enough. As the article says.....are you ready to ride out the downward spiral of consumer spending?

 

[dumpster56]

it used to be that home equity was for big things like renovations and sending kids to college. now people use it to buy things they otherwise can't afford.

No I was taught you ONLY used home equity when it would keep you from going to the poor house, really only used for major emergencies.

I never took a penny from that TOLL BROTHERS NEW HOUSE I sold in May for 513,000. I bought it new for 239,000 leaky windows and all!!

Was able to walk away with almost 300,000 profit in 10 years, It was and now makes it so the mortgage on my new house is so low!

Plus we just spent the night with 60 mph wind gusts 4 inches of rain and guess what you really could not hear a darn thing! A well built house!!

 

[al_bundy]

how is toll brothers quality? my wife was into their homes until i found that jd power rates them pretty low. did they fix the problems you had?

 

[dunc0029]

This is a good trend for me as well. I have been priced out of the market for a long time and am patiently waiting for a return to normalcy. Things are looking pretty good that I'll be able to afford something decent in the next couple years.

I don't know whether to have sympathy for the herd followers that have been buying because they thought prices would always continue to skyrocket.

 

[dumpster56]

how is toll brothers quality? my wife was into their homes until i found that jd power rates them pretty low. did they fix the problems you had?

The house was built well, materials were low end, they did not fix things, they made you pay for every extra like high hats in the ceilings, upgrade this and upgrade that.

Too expensive for what you get.

Heck the windows leaked everytime it rained! They ended up replaceing most, they still leaked.

 

[Alex]

In ten years this article will seem very silly. I am willing to bet that anyone here would gladly purchase as much real estate at they possibly could at today's prices ten years from now. Real estate is a long term investment, if you speculate, you must understand the risks.

 

[al_bundy]

In ten years this article will seem very silly. I am willing to bet that anyone here would gladly purchase as much real estate at they possibly could at today's prices ten years from now.  Real estate is a long term investment, if you speculate, you must understand the risks.

someone has to be able to afford it in order for it to have value. too many people cannot afford starter homes today. Median price is around $230,000. This means 10 years from now a starter home will be close to $500,000 and the median family income will go from around $60,000 to $150,000 or so.

Reason prices are so high today is liquidity. Banks lent to anyone with all kinds of crazy repayment programs where you can pay 2% on a teaser rate with a higher rate later on. Next year we'll see just how many people can afford the higher rates.

 

[Texas Proud]

In ten years this article will seem very silly. I am willing to bet that anyone here would gladly purchase as much real estate at they possibly could at today's prices ten years from now. Real estate is a long term investment, if you speculate, you must understand the risks.

I think I will wait a few years for the prices to continue to drop before I buy... I am in no hurry...

And if I am wrong.. Oh well... I still can live in my house I have...

 

[Helena]

someone has to be able to afford it in order for it to have value. too many people cannot afford starter homes today. Median price is around $230,000. This means 10 years from now a starter home will be close to $500,000 and the median family income will go from around $60,000 to $150,000 or so.

The median income here in DFW is decreasing BIG TIME !
The recent massive influx of immigrants "doing the jobs
Americans won't do" are lowering it.



New arrivals fuel drop in incomes

Experts say influx of low-wage workers cuts adjusted pay 10%


click here for entire article

 

[Brat]

Low wage workers aren't in the home buying game (they are renters) which is why I think it is a mistake to compare median wages to median home proces.  Our wage structure has become a bar-bell with a small weights along one end.

Wages:
lllllll--------iiiiiiiilll
          ^
low     med     mid-upper
Home buyers:
        ...............
               ^
               Med

 

[wabmester]

Low wage workers aren't in the home buying game (they are renters) which is why I think it is a mistake to compare median wages to median home proces.

That used to be true, but the data shows that the rate of home ownership increased over the last several years (which is why rents dropped).   Mostly due to the new mortgages, especially option ARMs.

 

[Helena]

Low wage workers aren't in the home buying game (they are renters)

There are thousands of homes here with extended
[low wage] families living in them.

In my old neighborhood, the people who owned
the house next door had so many "relatives"
newly arrived from Mexico staying with them....
some of them were sleeping in their cars !

 

[Brat]

Ah... a rooming house!  When I worked for DOL I came to the opinion that farmers hired newly arrived immigrants from Mexico because they are usually very hard workers: the folks with get up and go, got up and went  - North. 

Oh, the stories I could share..

 

[Helena]

On housing front, it's beginning to get ugly


When the value of houses drop,
are the property taxes dropping too ?

I hope !

Will this force the cities counties, and
states to find alternate sources of revenue ?

This too could get ugly !

 

[Helena]

If the amount of consumer spending that arose from fictional home equity is as large as some predict, the American consumer is going to have a lot less dough to blow on $600 backpacks,
$350 jeans, $3,000 flat-screen TVs and the like.


I guess the next domino to fall will be consumerism...
especially if sales taxes are raised to compensate
on the loss of property taxes due to deflated home
values !

 

[wabmester]

When the value of houses drop, are the property taxes dropping too ?

Maybe.  When prices dropped in CA after the last bubble, I had to go to the county assessor's office to submit a challenge to their assessment.   It lowered my property taxes, but it wasn't automatic.

Will this force the cities counties, and states to find alternate sources of revenue?

No, they'll probably just raise the property tax rates.    The really sad thing about it is that when they get a tax windfall, they usually give themselves an irreversible pension benefit increase.   At least that's what happened during the tech bubble, and we're just starting to see the fallout now.

 

[Brat]

On housing front, it's beginning to get ugly

When the value of houses drop,
are the property taxes dropping too ?

Typically assessed value is used to aportion the tax burden.  If all homes fall at the same rate in a taxing district the $$$ property tax doesn't change.  The way to skinny down your property tax is to beat the other home owners to the assessor's door and have your value lowered. 

 

[al_bundy]

Maybe.  When prices dropped in CA after the last bubble, I had to go to the county assessor's office to submit a challenge to their assessment.   It lowered my property taxes, but it wasn't automatic.

No, they'll probably just raise the property tax rates.    The really sad thing about it is that when they get a tax windfall, they usually give themselves an irreversible pension benefit increase.   At least that's what happened during the tech bubble, and we're just starting to see the fallout now.

the usual excuse is we need to hire qualified people. i remember i did a paper about pension benefits in school a few years back and this was the excuse they used in san diego back in 1996

 

[astromeria]

the usual excuse is we need to hire qualified people. i remember i did a paper about pension benefits in school a few years back and this was the excuse they used in san diego back in 1996

Funny, that's the same excuse used to justify executive compensation

 

[Helena]

A Few More Thoughts on the Housing Market

September 1, 2006

John Mauldin

Given that real estate, in one form or another, accounted for about one-third of the jobs created in this last recovery, this does not bode well. Nor does the fact that home equity loans accounted for the bulk of the increase in consumer spending in recent years.

How ugly will it get? Not as ugly as in past cycles, as I think the Fed will once again step in and cuts rates aggressively. But it could be uncomfortable if you have the need to sell. However, if you are in the market to buy, it could be a great opportunity. Stay tuned.


http://www.2000wave.com/article.asp?id=mwo090106

 

[al_bundy]

Funny, that's the same excuse used to justify executive compensation

people aren't forced to pay executive compensation like they are forced to pay government pension benefits. some places people are paying crazy property taxes just to pay the benefits. if i don't like a company, i just don't buy their products.

 

[honobob]

people aren't forced to pay executive compensation like they are forced to pay government pension benefits. some places people are paying crazy property taxes just to pay the benefits. if i don't like a company, i just don't buy their products.

If you don't like the government..........................................