- How low will the housing prices go?
- Average cost of processing a foreclosure: $50,000
- February 2008 - 223,651 U.S. properties in foreclosure (60% increase from Feb 2007)
- 1 out of every 557 U.S. households received a foreclosure notice in Feb 2008
- Renters are being hit by housing bubble when landlords are foreclosed on
- Felton California housing bubble bursting, perhaps
- Art Bell Interview with Mish Shedlock about the 2008 U.S. Economy
- Predicting four years of pain in the housing marketing
- Huge housing bubbles in foreign countries such as U.K., Germany, etc.
- We're making exactly the mistakes that Japan made. A possible difference between U.S. problems and Japanese problems is that at least the Japanese were used to saving.
- Backlash against bail outs for the subprime market
- Mortgage Defaults Rising
- U.S. Housing Crash Continues
- Why it's a terrible time to buy a home
- 1. House prices are too high compared to the fundamentals. http://www.housingbubblebust.com/Fed/GDPvsHSG.html
- 2. Borrowers over-borrowed, now interest rates are too high.
- Fannie Mae and taxpayers are stuck with the risks of marginal loans
- 3. Interest rates increasing from 5% to 7% causes a 40% increase in (yearly) payment.
| How increase in interest rate causes drop in house price |
| At 5%, $1000 per month pays for interest on a $240,000 loan |
| At 7%, $1000 per month pays for interest on a $171,428 loan |
| Adjustable rate mortgages will adjust to these new rates. |
- 4. Leverage can help to lose everything from a small drop
- 10% of equity is wiped out by a 10% drop in price.
- Remember cost of selling, at 6%, so only a 4% drop (+ 6% commission) wipes out the equity.
- 5. Less than 10 percent in SF Bay Area can afford median priced home in 2006 (down from 20% in July 2003)
- 6. Too many speculators - 25% of house purchases in 2005
- 7. Fraudulent loan applications, and appraisals for overvalue.
- Get too high of a mortgage, pay off the old owner, then try to get out of the new overly large mortgage before the surplus money is depleated from paying the overly large mortgage.
- 8. Baby boomer retirement forcing them to sell to get their hands on equity money, especially for the large number who have no other savings.
- 9. Glut of empty housing - Builders have overbuilt and excess housing inventory
- 10. Business Week: "Today's housing prices are predicated on an impossible combination: the strong growth in income and asset values of a strong economy, plus the ultra-low interest rates of a weak economy. Either the economy's long-term prospects will get worse or rates will rise. In either scenario, housing will weaken."
- Wary lenders watch for short sale collusion between investors and borrowers
- Short sales aren't as simple as asking the lender in advance to accept whatever price the market will bear. It's up to the seller to first put the house on the market, find a buyer and negotiate a deal. Only then will the lender check over the financials and either approve or reject the deal.
- "Most of the people we deal with are more than $1,000 away from making ends meet when their loan adjusts."
- The big wave of mortgage resets isn't due until next year, Thompson said. "We are talking about big numbers going forward."
- http://www.kron.com/Global/story.asp?S=4398855
- Pre-foreclosures, preforeclosures, short sales, buying from the bank
- "short sale" or "short payoff sale" - lender allows the property to be sold for less than the exiting loan balance.
- Characteristics of real estate bubble
- Collapsing housing bubbles, on the other hand, are characterized by illiquidity, a sudden collapse in transactions.
- But can't buyers be enticed by declining prices, by bargain hunting, you ask? No. Once housing sale transactions suddenly fall from, say, several hundred a month in a large community to, say, one or two a month, this creates fear and loathing about prices. Long periods of time pass when there are no transactions at all. Think of it this way. What's the comparable on your 3000 square foot home in San Mateo when the last sale was, say, seven months ago? Is it 10% less than the last sale of a similar home on the area? 30% less? This happened in Japan, and prices nationally are still more than 60% below peak prices in 1992, where real estate prices continued to climb for several years after their stock market bubble popped. Sound familiar?
- September 2005 - Bubble won't burst
- rapid price increases stem not from a speculative frenzy but from basic economic factors, including low interest rates, strong income growth and abnormally low prices in the mid-1990s, said researchers at Columbia University and the University of Pennsylvania's Wharton School.
- When mortgage interest rates increase – as he expects them to do within 18 months or so – prices in the Bay Area could decline by as much as 15 percent
- a high percentage of buyers – about 60 percent in California in 2004 – are taking out interest-only loans.
- Bay Area Housing Bubble Blog
- Why buy a home when you can rent for half the cost?
- Rent Vs. Buy
- By comparing $1,000 a month rent to a $200,000 house that appreciates only 3% per year (with a 6.5% mortgage rate, a downpayment of about $15,500 and 3% property taxes), the breakeven period is 16 years
 . A true amortization of the cost of new appliances, heating and A/C maintenance, plumber visits, and the latest power tools from Home Depot would likely put that figure much higher. In fact, if that maintenance figure doubles to $2,400 a year, the "buy" decision never breaks even during the life of the mortgage.
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Queries:
- "bay area" "housing bubble"
- "bay area" "housing bubble" 2007
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Trends:
- A lot of articles from 2005 say "Oh no problem, no bubble."
- Articles from 2007 say "Much faster acceleration in problems than people thought."
- More affluent areas are better protected from the bubble so far. Marin, San Francisco, still laughing at the bubble, while Vallejo foreclosure measurements going up to several times last years level (although Marin notice of defaults are up 100% from last year)
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Other responses:
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