Housing resales jump on lower prices
posted at 1:10 pm on January 27, 2009 by Ed Morrissey
When the housing bubble popped, inflated home values created by government intervention in lending markets began to decline. Gloom-and-doom forecasts predicted a complete crash in values and homeowners losing their central investment. However, as most of us predicted, sales rebounded when housing found more realistic pricing:
Sales of previously owned homes in the U.S. unexpectedly rose from a record low, propelled by the biggest slump in prices since the Great Depression as foreclosures surged.
Purchases rose 6.5 percent to an annual rate of 4.74 million from 4.45 million in November that was less than previously estimated, the National Association of Realtors said today in Washington. The median price dropped 15 percent from a year ago, the biggest decline since records began in 1968 and probably the biggest in seven decades, according to the group.
“You have to put it in the context of an even steeper decline for the previous month,” said David Sloan, a senior economist at 4Cast Inc. in New York, who had the highest projection in the Bloomberg News survey. “The net trend is still negative. It does seem that some cheap prices are attracting buyers. I don’t think it’s a clear sign of a revival in the housing market. The housing market is very weak.”
I’m not sure why the previous month would be all that relevant. No one is arguing that the housing market is strong, especially not in new construction. However, the prices fell from what was a noncompetitive level from the previous month to a more competitive price in December, just three months after the bubble popped. That indicates that the market may have discovered its pricing equilibrium within a short period of time, and a harbinger that at least the resale market has stabilized.
In his book Irrational Exuberance, Robert Schiller looks at the historical trends of housing prices as compared to population, T-bond yields, and building costs. Bear in mind that this chart reflects data already adjusted for inflation:
The huge spike corresponds to the government intervention in the lending markets that set off a mortgage spree, which brought large numbers of buyers into a market for which they had not earlier been qualified. The massive increase in demand drove housing prices far above the rate of inflation, in a cycle that could only be maintained as long as the government pushed more and more buyers with bad and worse qualifications into the market.
Now, if we have reached bottom by only losing 15% of home values on resales, then we have managed to survive rather cheaply. Bloomberg’s “worst decline since 1968″ description misses the point. The bubble created an enormous and unsupportable increase in values, and the market is returning to a more rational valuation — which is what happens when bubbles pop. It’s painful, but eventually the market reaches an equilibrium between buyers and sellers. In fact, that’s what markets do, and why they work. Government intervention creates the bubbles that eventually go bust by working against the natural equilibrium of markets.
Blowback
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Lower prices=higher demand? OMG shocking!
clnurnberg on January 27, 2009 at 1:12 PM
Gee, as demand went up, price went up, as demand declined, price declines. It’s almost as if there’s an invisible hand guiding the market. . .
rbj on January 27, 2009 at 1:13 PM
My God, the market actually works without guidance from The One™? Say it isn’t so.
johnsteele on January 27, 2009 at 1:16 PM
Deep in the article:
Translation: ‘distressed’ = ‘foreclosed’. The news is not all that good.
Vashta.Nerada on January 27, 2009 at 1:16 PM
Now only 11 months of inventory to clear out. We aren’t out of the woods by far. Prices came down, homes sold. This data indicates that there are plenty of homes that remain overpriced.
Angry Dumbo on January 27, 2009 at 1:18 PM
.
I agree. They’re so competitive they’re selling at less than what they’re worth. But a sell is a sell right?
I think we still have some surviving to do. I’m still pessimistic.
Free Constitution on January 27, 2009 at 1:20 PM
There’s still a long way to go. The banks aren’t lending as quickly as they were and there are a LOT of homes still to go into foreclosure.
Should homeowners sacrifice ALL their savings/investments to stay in a home that has lot 40% of it’s value of purchase?
originalpechanga on January 27, 2009 at 1:21 PM
…….An invisible hand, interesting………….non-economists will think it is the hand of Duh One™.
t on January 27, 2009 at 1:22 PM
Some good news! How welcome. And, it would seem that the banks are springing to support sensible mortgages for sensible people? As for distressed property supporting the jump, twas ever thus.
jeanie on January 27, 2009 at 1:23 PM
FC, by definition, can a house sell for less than it’s worth? Isn’t a home worth what someone pays for – willing buyer/seller and all that?
Hoodlumman on January 27, 2009 at 1:24 PM
It’s more complicated than a simple low prices means more sales, because there are deflationary expectations. People are holding off buying because prices are falling even though they would be ok with paying the current price. So increased sales is good news, but the turnaround won’t happen until prices stabilize, and inventory is still too high for that, although it is not was bad as the months of supply would suggest, because sales are down because prices are still falling.
pedestrian on January 27, 2009 at 1:24 PM
The bubble has a long way to go. We are moving from a town which didn’t bubble at all to another that was near the top of the scale on Ed’s chart. We are astonished that the asking prices there have been so stable! 15% is nothing compared to the doubling or tripling of prices over the last 7 years or so. So these prices are still rediculously high while many of these homes have gone to the banks and there are huge numbers on the market. Do the realtors associations conspire to hold up prices? In this economy fewer and fewer people can afford these homes. We keep asking ourselves why these prices aren’t plummeting?
Christian Conservative on January 27, 2009 at 1:24 PM
wow. who wudda thunk it.
lower prices increase sales?
how can sales possibly increase without government intervention?
gotta go seach my copy of Das Kapital to see where that is discussed.
notagool on January 27, 2009 at 1:25 PM
I didn’t need a graph to tell me that.
If I had big bucks right now, I’d be snapping up foreclosed properties.
The key here is realistic prices.
DUH.
Badger40 on January 27, 2009 at 1:27 PM
True, but it beats leaving them for squatters to take over.
btw, for all its numerous faults, the TARP is actually doing some good too, at least in Georgia.
Do not take this as endorsement of Obama/Pelosi/Reid’s scheme to become our socialist overlords.
Buy Danish on January 27, 2009 at 1:28 PM
In a lot of areas houses are selling for replacement cost. In Detroit, that doesn’t matter because no one is going to want to replace them, thanks to the UAW. But in other areas with strong businesses, people are holding off buying, and sellers are waiting for a normal market so they don’t have to sell below what comparable new houses will sell for once the market stabilizes.
pedestrian on January 27, 2009 at 1:28 PM
Holely Moley. That is crazy how that works. If you lower the price they will come.
Mr. Joe on January 27, 2009 at 1:29 PM
So houses never sell for less than worth? What are all these foreclosures selling for? Less than what is still owed on them.
Free Constitution on January 27, 2009 at 1:31 PM
At least that money appears to be going to ventures that engage in constructive economic activity as opposed to funding condom distribution among people who won’t bother to use them and funding to promote ACORN activities and funding for God only knows what.
BuckeyeSam on January 27, 2009 at 1:31 PM
did you see the WaPo piece yesterday on China’s role in the housing bubble? interesting
jp on January 27, 2009 at 1:32 PM
…amazing how this “supply and demand” thing work…shocking how when the prices fall to a point where it makes sense people buy.
I mean it is almost like magic…
Gosh, and all this time here was a solution, and nobody thought of it.
Why I bet if you made the GM cars competitive in quality and price, they might sell some of them also.
You know, this idea just might catch on…keep the quality and lower price…I know it sounds strange.
Imagine, without any gov. telling what price to sell something, it actually ends up selling.
I am just totally shocked about this new idea “free market”…someone should tell our political leaders before they waste all that money.
right2bright on January 27, 2009 at 1:34 PM
In many ways, I’m laughing all the way to the bank.
My ex-wife gave up quite a bit to get whole possession of the house. The divorce was finalized in 2005, the house is in Tampa, FL. One of the areas that saw the biggest housing bubbles. In the last year, that house has lost more than half it’s value. Meanwhile, the house that I bought last year has lost none of it’s value.
MarkTheGreat on January 27, 2009 at 1:35 PM
Lower prices=higher demand? OMG shocking!Obama works his will
Wade on January 27, 2009 at 1:35 PM
I love it. Good for you!
Badger40 on January 27, 2009 at 1:36 PM
Ogabe really is magic. How does he do it?
Bishop on January 27, 2009 at 1:36 PM
I would love love love to buy a house. Anyone know a bank that’ll loan me money?! :)
Bob's Kid on January 27, 2009 at 1:37 PM
Technically, a home is worth what you can sell it for…foreclosure or not.
It isn’t what is owed, if someone was foolish to pay $500,000 for that could only sell for $100,000, it is now worth $400,000 less.
A home, car, blanket, dog, is only worth what you are willing to pay for it…I think it is the free market that does that kind of stuff.
right2bright on January 27, 2009 at 1:38 PM
If you have been thinking about re-modeling or any other kind work on your house. Now is the time to do it. Skilled contractors will never be cheaper.
MarkTheGreat on January 27, 2009 at 1:38 PM
MarkTheGreat on January 27, 2009 at 1:35 PM
So you have recently joined the ranks of us with former wives? Welcome, brother, welcome to the side of light.
My starter wife is living with the drummer of a bar band, my current wife is a successful business-woman.
Bishop on January 27, 2009 at 1:38 PM
There’s the answer to your question. If people are still moving into the new town, then there is new demand that is holding up the price of housing.
MarkTheGreat on January 27, 2009 at 1:40 PM
Probably the next big “feminist” case…If he can take 1/2 the assets, he needs to take 1/2 the losses…I can just begin to hear the whining…
right2bright on January 27, 2009 at 1:40 PM
I would love love love to buy a house. Anyone know a bank that’ll loan me money?! :)
Bob’s Kid on January 27, 2009 at 1:37 PM
Cozy up to Dodd, he will set you up with whatever you need.
Bishop on January 27, 2009 at 1:41 PM
Bishop on January 27, 2009 at 1:38 PM
I’d been married for 23 years, when my wife dumped me for a younger man.
That marriage lasted less than a year.
I’m re-married, and happier than I can ever remember being.
MarkTheGreat on January 27, 2009 at 1:44 PM
That happened to my mother. After 16 yrs with an insane woman, my dad has finally realized he got rid of the best thing that ever happened to him.
But you have a happy ending-my mom did not.
Kudos!
Badger40 on January 27, 2009 at 1:46 PM
But I thought that the free market and her capitalist pigs were responsible for everything wrong in the world?!!
You know the moonbats and other associated morons will give Obama credit for any remote improvement in any sector of the economy.
ExcessivelyDiverted on January 27, 2009 at 1:49 PM
Obama’s staff meanwhile works tirelessly to figure how he is responsible for the upswing.
Hening on January 27, 2009 at 1:50 PM
Clinton planted the seeds of Utopia;
Congress added the manure and water;
Bush failed to weed the garden;
The weeds took over and choked out the flowers;
What will Obama do?
Mr_Magoo on January 27, 2009 at 1:57 PM
Pee on everything & watch it all wither & die.
Badger40 on January 27, 2009 at 2:00 PM
I can see the spin now.
“Since The Chosen One’s election, housing prices have fallen, the skies are beginning to clear, the oceans have ceased their rise, the climate has moderated.
Can I get an Alleluia?
GarandFan on January 27, 2009 at 2:02 PM
The principle behind eBay. Set a reserve too high and you might not sell your item. Start low (no reserve), and if enough people want it, you can make a profit, sometimes surprising ones. People will bid high just to enrue they get it, simply because it’s what they want, not what it’s worth to others.
Although I suppose the One will want the Powersellers to share their income with those whose items went unsold.
It’s fairer.
Wethal on January 27, 2009 at 2:04 PM
Ed: Pinning the housing bubble exclusively on “government intervention” seems overly simplistic. The government intervened in the form of a CRA with teeth that forced lending to ethnic minorities, and in the form of Fannie and Freddie, government sponsored agencies that promoted the bundling of these loans and assumed their risk (on behalf of taxpayers).
But, Wall St. bankers saw this bandwagon and jumped aboard out of a self-interest that spread this toxic waste throughout the economy.
Market bending legislation and market breaking assumption of (huge) risk by the GSAs are primarily responsible, but Wall St. players took advantage of the situation and deserve to be named and blamed as well. Analysis that ignores their contribution altogether has no hope of persuading those who would blame Wall St. exclusively and do not understand the government intervention affects.
exdeadhead on January 27, 2009 at 2:07 PM
It’s gone almost entirely unnoticed, but there has been a significant baby boom in the last two years. There were nore babies born in the U.S. in 2007 than in any year in history, including 1957. That’s a lot of new and growing families that need bigger homes. Demographics do not stop just because the economy changes. There is significant demand for starter homes and “first move-up” homes, and a lot of foreclosed properties are being sold to these new families.
However, the market for larger and more expensive homes is still in the toilet. This part of the market was vastly overbuilt during the boom, and these homes are still not affordable for young families.
It’s actually a very good sign if a lot of the home sales were distressed properties. Sales of these homes allow the original lenders to clear their books, and they return the homes to the local tax rolls which benefits the local governments.
A wise realtor one told me that every home can be sold, if the price is right.
rockmom on January 27, 2009 at 2:11 PM
You mean banks are letting money go to people? hmmm.
The only money I’ve seen change hands with the customers are the fees they continue to steal.
johnnyU on January 27, 2009 at 2:13 PM
Technically, and in a sense completely arbitrary. If a house’s worth is defined by what it sells for, then a house that does not sell is worth zero. Yet the copper within the house has value.
Free Constitution on January 27, 2009 at 2:18 PM
This is not the market at work, the government is reflating the housing bubble. FHA loans are still being made, AND the government is giving a $7500 tax credit for first time buyers. I just noticed that a few properties that I am looking at have gone up in price. The market will react by prices going up by say $7500.
I’m betting Obama’s economic advisors know that an interest rate hike in inevitable but that do not have the latitude to raise interest rates given the supply of houses on the market. So give even more money away to soak up supply before Bernanke is forced to raise rates.
Theworldisnotenough on January 27, 2009 at 2:18 PM
Absolutely! We sold our house in seven days. We didn’t undervalue the property, we just put a fair market price and still made a killing.
And imagine this….we got a loan to buy another home. And we didn’t even need acorn beating down the bank’s door calling them racists. All you need is good credit.
It’s amazing, this capitalist market stuff.
HornetSting on January 27, 2009 at 2:19 PM
I’m not quite sure I’m ready to start marching in the real estate parade just yet. I believe that the spike in sales is being caused by folks who think now is a good time to snap up a bargain, but this only makes sense if you believe that Obama’s stimulus plan is going to work.
I don’t, so as much as I want to move I feel that buying now would be a big mistake. Job losses will continue as companies are put out of business by the fools who want to raise taxes on them. People without jobs usually don’t buy houses, which will lower demand and further lower prices. My logic could be incorrect (I’m sure someone will point out how) but I believe that the best real estate bargains are yet to come, perhaps in 12-18 months time.
dinobalz on January 27, 2009 at 2:26 PM
I’m currently having to sell my house (wife lost her job and we have to relocate for her new job).
Here is the worst news for us home owners, its going to get much worse before it gets better, and here is why. The assessors that the banks use have to use foreclosures and short-sales in their comps (comparisons) with *your* house. For a real life example, my friends own a 4800 sq. ft. home here in Brevard county Florida. It sits on >1 acre of land (land is especially expensive here in coastal Florida, often selling for >200k per acre undeveloped). They owed 650k on their house (bought it for 850k). The people they were selling it to put down 250k in cash and they had a contract written up for the 650k. Then, the bank had the assessor come out and he said the house was worth 550k based upon comps in the area, including foreclosures and short-sales and would not carry the remaining balance/loan for more than 300k. My friends were beyond pissed and hired their own (independent) assessor and got another bank. The second assessor gave them the same price/value. After paying the realtors 2.0% each (22k), they are walking away OWING 122k on **nothing** (their asset is gone). Their credit score is over 830, so to prevent ruining their credit, they decided to eat the loss and they are carrying the loan to their next residence…
I’m sure most of you can see where this will lead. When people have to sell their house (loss of jobs, relocation, etc.) and they are faced with either having a debt on an asset they don’t own or ruining their credit for 7 years, the number of foreclosures are going to **increase**! I have 2 other friends that literally said the exact same thing to their bank when one of them lost 30k on their house and the other had to sell their house for a 42k loss…they both tossed the keys and told the bank to F***off, and moved out of their house in one weekend. Many, many people when faced with the prospect of losing all of their equity and primary “asset” while also facing having to pay realtors 4-6% of the sale price of the house are going to walk away from the deal and let the house be foreclosed on. As long as banks and assessors continue to base comps including foreclosures and short-sales, the situation will continue to decline and its going to get much, much worse in the near term.
In my mind, the banks are doing this to themselves, and some (I have Countrywide as my lender…eeeeaaakkk!) are going to use the bailout monies to offset their losses. So, the individual homeowners get screwed over in their major investment and the banks skate with little worry.
It makes me physically ill to think of how much money, time and energy I’ve invested in my house and now I’m looking at **losing** money because the banks don’t give a flying f*** about us and other individuals (vultures) are only too happy to offer up low ball offers for our custom built home because of the assessed value. Not only will I soon be facing having a debt for no asset, but I will also be unable to purchase a new house at my next location because I will so far behind from this potential new loan and the loss of any monies to put down on a new house…
I cannot express how angry this makes me at politicians such as Chris Dodd, Barney Frank and any of the other bailout freaks, not to mention the programs that were forced down the banks’ throats.
Geministorm on January 27, 2009 at 2:27 PM
You see, the market takes care of itself if the government stays out of the way.
Johan Klaus on January 27, 2009 at 2:30 PM
You need a class-action lawsuit against these jackals to recoup your money. Dodd, Frank, Acorn….
I hope all works out for you, storm.
HornetSting on January 27, 2009 at 2:35 PM
Prices are still higher than they should be in some places.
Terrye on January 27, 2009 at 2:35 PM
There will probably never be a time again in our life spans where the government “stays out of the way” again. Bureaucracies only grow, they never shrink and the primary function of any bureaucracy (before its actual purpose) is to be self-perpetuating. Going forward, we have only more government interference to look forward to, while at the same time more and more people will come to depend on the federal government, thus insuring that the hand-out mavens (Democrats) will remain in power for the next 50-100 years.
It is the fall of the great American experiment, served up on a cold platter.
.
Geministorm on January 27, 2009 at 2:36 PM
Something could be worth less than the sum of its parts. The house might be in bad condition and/or bad location. I might want the copper in the house, but not have to deal with the transactional costs of buying the house, and the land it sits on. Then I have other assets besides the copper that I do not want. If no one is able and willing to buy that house, then yes, it is worth zero. Unusual circumstance, but not unheard of.
Location, location, location. You are obviously moving to a desirable place. Hence the demand is still there, which keeps the prices up.
Houses are not fungible goods. A 3 bedroom, 2 bath house in Cody WY is not the same as a 3 bedroom, 2 bath house in Greenwich CT.
rbj on January 27, 2009 at 2:36 PM
No…nope…won’t believe it. Only Barry Obama says he can save us from this housing crisis.
Wyznowski on January 27, 2009 at 2:40 PM
No, and I’d rather pay less and live free in Cody anyday.
And since I’m going to be able to make an oversight on paying taxes, the Geitner way, I should have plenty of extra dough for upgrades.
kirkill on January 27, 2009 at 2:43 PM
The stimulus worked!
Chuck Schick on January 27, 2009 at 2:47 PM
Don’t know where you live but this is not my experience right now. Typical home sales outside of Phoenix published in the paper. 1900 sq ft for 75,000. I paid 155,000 in 2004 for 1800 sq feet.
Mr_Magoo on January 27, 2009 at 2:47 PM
BTW- Jumbos dropped hard this week. I locked in Friday on a new 5/1 ARM @5.25%… shaving a whopping $1500 off my monthly payment. Im going to go get a box of condoms and do some stimulating.
Chuck Schick on January 27, 2009 at 2:53 PM
I was thinking more along the lines of an air bubble in my vein…but hey, to each their own. Maybe if I go live in a cardboard box under an overpass and piss myself I’ll get taken care of by our nanny state government?
Geministorm on January 27, 2009 at 3:04 PM
I could easily understand your feelings about the losses you and your friends would have to take when having to relocate to a new job in a bad housing market. But seriously, people need high incomes to buy an $850K house–interest alone could cost $50K per year, and money is needed for other living expenses. Were you and your friends led into these houses by lenders offering low “teaser” rates on ARM’s, which then ballooned out of control?
Lenders of FIXED-RATE mortgages usually impose a maximum payment/income ratio, above which they won’t lend money, which usually ranges from about 25 to 30%. On a fixed-rate mortgage, payments remain constant in current dollars, but become cheaper in inflation-adjusted dollars, so the first year is the worst. As long as the borrower keeps his/her job, the borrower can wait out any downturn by simply living in the house, and waiting for values to rise, which they inevitably do in the long run.
The problem comes with adjustable-rate mortgages: what criteria (if any) are used by the lender to figure out whether the borrower can repay the loan? If, for example, a payment/income ratio of 30% based on a 3% “teaser” rate is used to qualify a borrower for an ARM, what happens when the rate jumps to 6%, 7%, or higher, and the mortgage payment is 60% or 70% of the borrower’s income?
People sometimes have eyes bigger than their wallets, and can be easily led astray by predatory lenders, who don’t DESERVE to be bailed out. It’s very easy for a young starry-eyed married couple to be tempted by a “dream” house beyond their means, made possible by an ARM, but wouldn’t it be better for them to rent for a few years, save up a down payment, and buy a smaller house using a fixed-rate mortgage, possibly during a downturn in the market?
Obama was fond of blaming the housing/mortgage crisis on “deregulation”, but Fannie Mae and Freddie Mac were forced by over-regulation into lending to insolvent borrowers. And how about “regulation” that makes sense? Like basing payment/income ratios to qualify for ARMs on the MAXIMUM possible interest rate? Like requiring “ratings” for mortgages (the AAA rating, etc.) to be based on payment/income ratios–the higher the ratio, the worse the rating? Or how about banning ARM’s altogether, since they have become dangerous traps for both borrowers AND lenders?
I too am a victim of an ARM, which I took out in 1982 on a condo, which I (finally) sold in 2006, after enduring “negative amortization”–owing more on the loan than its original value, for several years.
I learned my lesson, bought my first house in 1997 on a FIXED-RATE mortgage, which I refinanced to a lower rate in 2001. Right now, my house is still worth well over double what I owe on the mortgage, so I can either stay or sell with no problem.
The market CAN sort these things out, and government bailouts should be limited to fixed-rate mortgages to those in danger of foreclosure, up to a 30% payment/income ratio, and those who bit off more than they could chew DESERVE to lose their houses, because they never deserved to live there in the first place.
There are SOME banks that never made sub-prime mortgages, and they are sitting pretty now, with money to lend that they get from the Fed for a song. Why should they be penalized while those who made risky loans get bailed out?
Government CAN do more than bail people out. They could impose lending rules that could prevent this from happening again. But will they have the courage to do this?
Steve Z on January 27, 2009 at 3:26 PM
Sell the copper and that is what it is worth…the home is worth whatever you can get for it…it may have 200 year old pecan 2″ flooring and roof, and make it worth more then anything else…you sell the house for whatever it is worth…in pieces or a whole.
The problem we are in was partially caused by banks thinking the home was worth more then it was…or that it would “grow” into it’s worth, so they loaned money on an inflated value.
right2bright on January 27, 2009 at 3:26 PM
Someone offering what your home is worth is not a “vulture”, that is what the home is worth to them. A mistake in business is to take these things personally.
The banks loaned money on a home YOU bought, both of you thought it was a fair price…it just happens that you bought high. The cycle happens every so often.
What compounds this problem, is the baby boomers are downsizing…we are moving to smaller homes (or want to) in other areas besides high tax areas.
A weak economy, changing demographics, shifting of demographics, losing manufacturing, a “perfect storm” against home owners…
But the largest problem was the liberals forcing banks and others to give loans they should have never processed.
right2bright on January 27, 2009 at 3:33 PM
Still reeling from the fact that both of you seem to know about the existence of Cody, WY.
My collie says:
CyberCipher on January 27, 2009 at 3:37 PM
The One got elected and he said, Lo the housing market shalt tumble no more, so let it be written, so it shall be done. And the housing market set itself aright. And palm fronds were strewn across the path of the One for his miracle workings.
eaglewingz08 on January 27, 2009 at 3:40 PM
You have to pay it back over 15 years. Though a 15 year interest free loan is a better deal than you usually get from the feds.
MarkTheGreat on January 27, 2009 at 3:42 PM
crazy_legs on January 27, 2009 at 3:44 PM
That’s only true if the house was offered for a penny, and it did not sell. That basically doesn’t happen, and, if it did, it would only happen because the liabilities, especially property taxes, associated with the purchase, would exceed the true value of the house. Getting $500 worth of copper wouldn’t be worth assuming a $1000/year tax liability.
Splunge on January 27, 2009 at 3:44 PM
Nah. They’re still trying to figure out the “Outlook server.”
crazy_legs on January 27, 2009 at 3:44 PM
Drove through there twice, between NY and Oregon. Always looked like a decent place to
hide outsettle down if necessary. And after the Yellowstone eruption, there’ll be a lot of new cheap land in North America.rbj on January 27, 2009 at 3:45 PM
There are many places in this country were home values did not skyrocket in past years. These places are also not seeing a collapse in housing prices.
MarkTheGreat on January 27, 2009 at 3:45 PM
Mr_Magoo on January 27, 2009 at 2:47 PM
I live in Iowa. Around here housing prices are pretty much stable.
MarkTheGreat on January 27, 2009 at 3:50 PM
If inflation kicks in the way I’m expecting it to, that ARM is going to eat you alive in a few years.
MarkTheGreat on January 27, 2009 at 3:59 PM
Two thirds of foreclosures are taking place in California, Nevada, Arizona and South Florida. So, the housing data is skewed by these markets. These guys are curve busters…You need to look at your local market. In my market Charleston, SC prices are down only a few percent from last year although the sales volume has taken a 30% hit. There are distressed properties but they are not a big part of the market. Once the distressed properties are sold off the market will return to normal.
Nozzle on January 27, 2009 at 4:09 PM
Fixed rate mortgage, however we bought in 2004 when the market was very high here in Brevard (fastest in the nation at the time). This was necessitated by my former employer laying off 30k employees in a single year, which I got caught in.
I disagree that people “deserve” to have their houses taken from them for the simple fact that they have made an investment that the bank agreed to make a loan on. The bank is the guilty party here, they did no one any good (not the bank’s investors/members, nor the loan applicants) by agreeing to a loan that the applicants were not truly eligible for. In my case, we’ve only owned our home for 4-5 years, so what we’ve been paying on has been primarily interest, and to head off the question, yes it was a loan we were eligible for and can pay for. My problem with the situation is that by having a value on the home that is less than what I owe on the house, I will be put into a bind financially (not to mention my wife losing her job puts financial strain on the situation) where everyone makes out except the owner of the asset. The bank gets paid what is owed, the realtor gets 4-6% of the sales price, the buyer gets a home for less than its value (** make sure that you understand that the value of my home is directly affected by the foreclosures of properties in my area, so it is NOT the true value of my home **) and I walk away owing thousands of dollars with nothing to show for it.
Um, yeah they are. They aren’t offering what they value the home at (as my friends’ example shows, they had a contract for 650k, but the bank would only make a loan for 550k due to the assessment, regardless of what the buyer wanted to pay for it). And, many of these people are specifically looking to lowball offers because they know that the market is way down and that the assessors will roll in the foreclosures and short-sales. Again, the value of my home is being directly affected by OTHER PEOPLE getting/letting their homes be foreclosed on, how can you possibly say that my house is worth less because some house 2 miles away was foreclosed on because the BANK made a loan to someone that they shouldn’t have?!? I’ve paid my bills, I made the right down payment after working and saving for years, I bought a house I could afford and now I pay the penalty.
Geministorm on January 27, 2009 at 4:13 PM
We have a fixed-rate mortgage, quite affordable monthly payment. My husband got orders out of state last year, right around when housing prices plummeted around here. Couple that with the gang that moved into our neighborhood, which drove values down even more, and now we’re stuck in a townhouse that we cannot sell without taking on more debt. Oh, and because life isn’t humourous enough, the heating system recently failed and the roof needs fixing (our inspector should lose his license, he missed a lot). We barely have the money to fix things to try to make the house more palatable, since I had to quit working to watch the kids. We’re here for the long-haul, with the kids getting to see Daddy only on the weekends, when we can afford it (13 months now and counting). There is no viable solution for our family at this time.
What really gets my goat is that our mortgage company (Countrywide) would rather us default on our loan and forclose than actually do something to help us (refinance). If we did that, my husband would lose his clearance, and most likely be pushed out of the Navy next year. We would lose so much, just to try to get out of this house in this bad market. There is nothing in place for families like ours, because we are responsible, on time, and can’t afford to lose 20-30K+ on a house sale. If I could, I would sue Dodd, Frank, and all those involved in this fiasco – for all the mental stress and hardship they’ve caused our family and others. Not going to happen, I know, but I’ve got to keep my humor, it’s the only thing I’ve got going right now for me.
Anna on January 27, 2009 at 4:25 PM
That is just heartbreaking, the problem is the fools that did this to us, never have to face us.
They live in their isolated kingdom, never having to people like you in the eye.
There is no reason for the mortgage companies to help you out, not while the spigot is flowing from Washington. The banks will have a lot of foreclosed houses, the feds will have bailed them out, and when the economy turns around they will sell them for a tidy profit.
Bailing out the banks, only gives them reason not to negotiate and help their customers…if they were on their own, and had to negotiate or go bankrupt, they would negotiate.
Hang in there…and take care of the kids.
right2bright on January 27, 2009 at 4:36 PM
Mark-
Thought about that because Im expecting what you are. Max rate is capped at 10% which will be painful should it actually happen, but certainly survivable. Ill be paying down the principal sharply as well and try to duck into a 30 year conforming jumbo + a secondary mortgage.
I am in one of the best cities in the US to sell a home according to Forbes last month. My house actually went up since last May. Im one of the fortunate ones.
Chuck Schick on January 27, 2009 at 4:38 PM
It’s the same for me. I found one in El Mirage (was renting for the past year and a half, sold my last house in Fall of 2007.) The house was built in 1999 and sold for 100k. Three years ago, it was sold for 240k. I’m under contract right now to buy it for 75k. Great time to be a buyer in the market out here right now.
Kelligan on January 27, 2009 at 5:03 PM
Well said Ed. Unfortunately introductory economics isn’t a required subject in either high school or college so most people don’t know anything about how markets work.
Loki on January 27, 2009 at 5:54 PM
Depends on where you live, but I think a lot of this buying spurt is “irrational exhuberance”. Here in San Diego, some houses went from 200k to 500k in about a five year span. That’s about a 150% percent increase. Median wages during the same time frame went up about 4%. Thank you illegal aliens. Some of your not so bright folks see the price drop from 500k down to 350k in the last couple of years and think that the price has dropped by a third, this must be a great market, but what they are missing is that the price of the home is actually still 75% above what it was before with virtually the same median wage level. Home prices are unlike any other price on earth because you have to pay for them over most of your working life for most people. Therefore there is an unbreakable connection between wages and home price. If you are paying more than about a third of your pay for your home, you are likely to lose it. That’s just the math. This idiotic idea of trying to skirt the rules of economics is as practical as skirting the rules of gravity. These people who are buying now, in my area of San Diego, are the same stupid dolts who bought high in the market and expected the price to double again. I might add one more thing, with the govt trying to prop up home prices by staving off foreclosures, the odds are that the final fall is going to be even worse, not softer. I’m beginning to think that these recent buyers are believing that if these sales don’t work out, that they will be able to get in on a govt bailout. Think I’m wrong?
Bikerken on January 28, 2009 at 12:20 AM
That’s a big if. Given what we are seeing in the data, and you can pretty much ignore month-to-month housing sales data because it is so volatile, unemployment is set to spike. You can bet that this will be another blow to the housing market.
We still have a huge load of debt to unwind. This isn’t over by a long shot.
Bill C on January 28, 2009 at 1:52 AM