Reddly9007

I just hope they keep falling, I don't want to pay more for a house that really isn't worth it.

http://money.cnn.com/2005/04/19/news...reut/index.htm

03typeS6spd

prices aren't falling yet... and i hope they don't

flatten out yes, but corrections aren't good for most anyone

Reddly9007

i'm not asking for the destruction of the real estate industry, I just don't feel that I should pay 40 grand more now then 6 months ago for the same house. Just as long as they stop rising like they have been i'll be happy. Its incredibily hard to be 24-25 and looking for a first house with this market.

03typeS6spd

im there with you, just bought my first a month ago


but now that i am in, i want it to keep going, i walked across the street to an open house this weekend and a 2 bed condo nearly identical to mine with no upgrades.... is going for 30k more than mine did one month ago

the realtor there gave us a black and white hand out because she went through all 50 color copies in 3 hours, the guys walking out of the building as we went in were talking about putting an escalating offer to 30k over the asking price...

it does seem pretty quick to be able to buy even at this age though doesn't it??? the banking industry is putting together all kinds of programs to get younger people in

doopstr

I just hope the young people don't get burned in the end. If you have all these young people taking interest only loans on their first house and the market goes down 20%, there is going to be a problem.

03typeS6spd

true, but younger people will have a chance to ride it out also, whereas the older you are the more screwed you are in terms of time to turn it around....

its not exactly like the stock market where just anyone can buy in, they do have some restrictions through credit score, salary, etc


its a big wash in the long run but scary for anyone reaching to their limit right now

fuzzy02CLS

iTrader: (2)

I hear you on that!!!!

FL sucks for housing

Reddly9007

I had no intention of ever having an interest only loan, bad idea in my book! I'm looking to build equity, not just make money and flip houses.

fuzzy02CLS, I know this market isn't as bad as NY and Cali, but how is someone our age suppose to afford a 220k house! Unless you have rich parents or some amazing job, its really hard to afford everything these days.

03typeS6spd

wow, i would kill to buy a 220k house, buy one now and don't even think twice about complaining....

as more of the baby boomer generation heads south to either coast they are going to take their large piles of equity money with them and prices are going to get astronomically higher than low 200's (imo)

half a mil is approaching the prohibitive range, and i don't see how you could complain about programs like interest only if it would let you get into housing now...

fdl

Housing will drop, its just a matter of when. I say this for 2 reasons:

1/ Historically, the real estate market is cyclical, and we are the the top of the cycle right now

2/ The main driving factor right now is interest rates, which are at historically low levels. This is bound to change and when it does it will almost certainly have an effect on housing.

So if/when interest rates make a significant move forward, house prices will fall.

03typeS6spd

they usually tend to flatline though, large bubbles are not common and if so are generally restricted to geographic regions (from the data i have seen)


either way 220 still seems very cheap to me for housing anywhere near a coast

NSXNEXT

iTrader: (2)

fdl

They will flatline and then dip, but not neccesarily crash. i.e we arent going to see prices from the mid 90's again, but its possible we can get to 2001 levels IMO.

220K? I cant even buy a shack here for that much. I need to pay double that for a townhouse

03typeS6spd

maybe in the northeast and west coast, i dont think things will absolutely dip, and the interest rates should have been rising already by now, they are still relatively lwo


edit:
let me just say that however you look at it 220 is still a bargain

Silver™

Not since the Great Depression have national home prices declined. Over 70 years of price appreciation.

Real estate will likely slow, but it will not decline on a national level. Some regional markets will decline, but that happens every year for various reasons.



An equally important factor is supply. Here in LA I just read that the supply of houses on the market is about 2,500. In 1997 it was over 14,000.

Even during the early 80's when mortgage rates jumped up to about 13% the national housing market still appreciated.



The Fed will do everything in their power to ensure it is a soft landing...

Silver™

Don't hold your breath...

Slimey

I'm in the process of buying and selling right now.

From the selling end, I think I'll be doing pretty well. From the buying end, maybe not as much. Whatever. Historically, real estate has appreciated as said above. It'll continue to do the same, albeit at a much slower rate.

fdl

70 year appreciation doesnt mean its not a cyclical market. I never said that 70 years from now house prices will be lower. They will undoubtably be higher, but there is still a historical 8 year real estate cycle (i.e. its not a steady climb, there are dips).

But more importantly is the "demand" part of that equation. When interest rates are higher, carrying costs will be higher. The same amount of people simply wont be able to afford homes. Renting will become a better option for some.

I'm not saying to brace for doomsday, but expect some cooling and a possible dip in many markets if/when interest rates rise significantly.

fdl

Interesting link

http://www.fdic.gov/bank/analytical/...fyi_table1.pdf

Silver™

It does mean that for over 70 years since the Great Depression national home prices have never once declined, even when mortgage rates were over 13%, even during recessions, even during stock market crashes, etc...



Well since the national housing market was still able to appreciate when rates were 13% I don't think people will stop buying when rates go up a couple points during the next couple years.

Sure the market will cool and some people will have to lower their standards or wait a little longer, but I find it hard to believe that it will cause a national price decline, even in "over-priced" areas like California where supply is so small and where we add 1/2 million people per year.




I agree that the market will cool and double digit growth will not continue indefinitely, but except for a few regional markets home prices will continue to increase.

03typeS6spd

doesn't that basically show any decreasing is strictly regional? (over the last 25 years)

fdl

Silver, when mortgage rates were at 13% home prices certainly fell. I'm not sure where you are getting yoru info from. I can tell you for sure we saw a hug crash in Toronto. But over the long term they will always be higher.

Are you suggesting the trend is a completely straight line with not a single dip?

fdl

There will always be regional differences, no doubt. Even within a single city there are areas which go down or up more than others.

I just dont see how you can think that a 13% mortgage wont hurt home prices in most cases

NSXNEXT

iTrader: (2)

Foreclosures will be adundant when this happens.

A few troubling signs of a real estate market top are emerging: An increasing percentage of home financings are done with adjustable-rate mortgages (ARMs), which indicates people are stretching to afford the homes they want. If rates rise quickly, buyers with short adjustment periods may face higher rates sooner than they expected. "That sets people up for a problem if something goes wrong," says David Kelly, economic advisor to Putnam Investments.

Silver™

Sorry I don't have time to find data that goes back beyond 1968...



Year median price increase percentage
1968 20,100 NA
1969 21,800 8.46%
1970 23,000 5.50%
1971 24,800 7.83%
1972 26,700 7.66%
1973 28,900 8.24%
1974 32,000 10.73%
1975 35,300 10.31%
1976 38,100 7.93%
1977 42,900 12.60%
1978 48,700 13.52%
1979 55,700 14.37%
1980 62,200 11.67%
1981 66,400 6.75%
1982 67,800 2.11%
1983 70,300 3.69%
1984 72,400 2.99%
1985 75,500 4.28%
1986 80,300 6.36%
1987 85,600 6.60%
1988 89,300 4.32%
1989 89,500 0.22%
1990 92,000 2.79%
1991 97,100 5.54%
1992 99,700 2.68%
1993 103,100 3.41%
1994 107,200 3.98%
1995 110,500 3.08%
1996 115,800 4.80%
1997 121,800 5.18%
1998 128,400 5.42%
1999 133,300 3.82%
2000 139,000 4.28%
2001 147,800 6.33%
2002 158,100 6.97%
2003 170,000 7.53%

http://www.realestateabc.com/graphs/natlmedian.htm


Mortgage rate 1983:

Date Fixed Rate Adjustable Rate
Jan-83 13.40% 12.71%
Feb-83 13.35% 12.49%
Mar-83 13.05% 12.08%
Apr-83 12.90% 11.75%
May-83 12.74% 11.51%
Jun-83 12.97% 11.50%
Jul-83 13.52% 11.71%
Aug-83 13.95% 11.85%
Sep-83 13.84% 11.80%
Oct-83 13.61% 11.60%
Nov-83 13.52% 11.49%
Dec-83 13.48% 11.45%

http://www.hsh.com/natmo83.html

Slimey

which brings to mind my other thread
https://acurazine.com/forums/money-investing-17/arm-vs-fixed-rate-mortgage-2005-a-303892/

fdl

silver, interesting data however I think its may be very misleading based on my previous link, and my own personal experiences. Perhpas there are certain strangth areas, or maybe the housing cycles peak and fall at different times in different areas.

Silver™

Your link (and perhaps your experience) deals with regional markets, not the national housing market as a whole.

But regardless I think we can both agree that the housing market will cool and that single digit appreciation will become the norm again. And while some regional markets may see a decline, the national housing market will continue to grow unless something catastrophic happens (and not just mortgage rates going up a couple points )...

03typeS6spd

i don't see how you think mortgages will ever go back up the 13% level

fdl

I never said that it would. Go back and re-read a few posts to understand why I used 13%.

Reddly9007

just got pre-approved for 275k from a home builder down here, i'm pretty happy about that. Its my first time applying for a pre-approval and I think thats a pretty damn good starting point. Even though most of you think houses are cheap down here, i still think that 220 or whatever is pretty damn expensive for a first time homebuyer. I have no help from parents nor am I wealthy beyond any means. So for all of you in markets which are double what mine is I feel for you cause I wouldn't be able to afford shit if that was the case here.

moeronn

If anything is going to slow down the housing market, it will likely be due to people in Reddly's situation. There could very well come a point where almost no first-time home buyer will be able to afford to get into the market. This will prevent those who want to "move up" from doing so, as they won't be able to sell their existing home. You're probably not going to have too many people moving from their 5 BD/4 BA house in the boonies into a 3 BD/2 BA house just to get closer to the city.

03typeS6spd

the beauty of it all is the leverage, making the appreciation seem to work harder for such little down, and the depreciation seem much less considering the same investment.... and the chances of your house up and disintegrating a la stock market are fairly nil

i still don't get why 13% would be a threat, the current trend during a recession now seems to be to lower the rate not increase it, maybe to curb massive inflation but not a recession...

either way from the brokers/bankers/agents i talk to, they all seem generally agree that rates won't go over the 7-8 mark barring something drastic

fuzzy02CLS

iTrader: (2)

FL is just a bad state to buy right now. EVERYTHING is inflated. 220 would by a mansion in 2000, or 2001. Not now. I'm looking & can't go above $170 & that's total with closing & eveything.

Reddly9007

just curious where you looking, and believe me I would love to spend around the same as you, I do not intend to spend more then probably 200k after everything. I at least have a (soon to be wife) to help with bills. I'm currently in Orlando but work outside the area, so i'm looking further east, somehwhere in north Brevard I figure.

Iron_Eagle

$200's?? Bah. I'm lucky I bought my house when I did and managed to get a 30-year fixed at 5.25%. I paid $275K for a 2250 sq. ft. single story on a 8K sq. ft. lot, and now it's worth ~$430K. The average starter home here in my area is over $390K now.

I definitely think it's slowing down, and the people with ARM's *could* be in trouble, but I doubt they will be, at least for now. I doubt the fed's will raise the rates above 3 1/2 until the economy picks up more, which could take a few years.

Zapata

these prices are crazy. Too much money for so little.

Iron_Eagle

Hahahaha, a little 750 sq. ft. condo in Santa Barbara goes for over half a mil.

Honestly, I'd move out of state, but my wife's entire family is here and so is my killer job. So I'm not leaving.

Slimey

It's all relative.

My parents bought their current home in 1972 for about $30K. They thought the homes for up the road going for $50K-$60K were astronomical in price. "Who would pay so much for a home?"

Imagine what today's homes will go for 30 years from now...it's daunting.

Reddly9007

My only problem with this thought process is.......wages are not increasing as much as home prices are! Thats the damn problem! Prices are going up but mean time people are not earning enough to keep up with it (my opinion).