42% hit in house values, my guess is that would be bad..

[bigq]

More Numbers:
Business Week reports on the shrinking mortgage business. "Sometime during the last quarter of 2005, the housing boom peaked. The proof is in the paperwork. Applications for purchase mortgages in early November fell below their 2004 level for the first time in six months, after a 5% drop from September to October, according to the Mortgage Bankers Assn. (MBA). By late December, applications had plunged to June, 2002 levels. The MBA expects mortgage originations to fall by 18.6% in 2006."
"Even the industry's boosters are getting nervous. 'There's no doubt that we're transitioning to a more challenging environment,' says Richard H. Wohl, CEO at IndyMac Mortgage Bank. Lenders' earnings have already begun to fall. 'Profitability in the industry is down, and over time that will take its toll,' says Doug Duncan, chief economist at the MBA."
"During the past few years, the industry built up enough capacity to pump out $3 trillion worth of loans a year. Now retrenchment is in the air. The first real whiffs came in November. The nation's largest mortgage bank, Countrywide Financial Corp. closed two loan-processing centers and eliminated 300 jobs. National City Corp. trimmed 70 workers at its mortgage business and hinted at more to come. Ameriquest Capital Corp. cut 1,500 people."
"The trouble is, the spread between short-term and long-term rates is narrowing. In fact, on Dec. 27, the yield of the 10-year Treasury note briefly dipped below that of the two-year Treasury bill; a year ago, about two percentage points separated the two. The smaller the spread between the two rates, the harder it is for lenders to make a profit."
"It gets worse. As mortgage demand has slowed, price competition among lenders has heated up. 'There are some competitors who are pricing irrationally,' says Stephen J. Rotella, chief operating officer at Seattle's Washington Mutual Inc."
"The result of these forces: a shrinking pie of less-profitable loans. In October, National City said third-quarter home-loan profits tumbled 91% from last year, to $13 million. In November, tax preparer H&R Block, blamed a $72 million loss in its fiscal second quarter (since revised to an $86.3 million loss) on a 44% annual drop in pretax income at its mortgage unit."
"At especially high risk: lenders that have sold lots of mortgages to so-called subprime borrowers with spotty credit records or unstable incomes. Some of these borrowers have escaped default in recent years only by refinancing at higher home values and lower interest rates. 'If real estate stops going up, the opportunity to refinance because of a higher value is going to go away,' says Michael Moskowitz. 'That's going to hurt companies that were doing bad business.'"
"Some lenders also face the consequences of the exotic-mortgage binge that has intoxicated borrowers for the past few years. Problems with option mortgages are already arising. In the third quarter of 2005, the amount of such mortgages available for sale to institutional investors from New York's MortgageIT Holdings Inc. swelled to about 30% of the company's total inventory."
"Those mortgages carry a low introductory rate of 1% in their first month, which is usually how long MortgageIT owns them before selling them. That 1% rate brings in less money than it costs the company to finance the loans with short-term borrowing. Yields on loans held for sale fell during the third quarter, costing MortgageIT about $18.3 million. If short-term rates keep climbing, yields could drop further."

[totenhosen]

Business Week reports on the shrinking mortgage business. "Sometime during the last quarter of 2005, the housing boom peaked. The proof is in the paperwork. Applications for purchase mortgages in early November fell below their 2004 level for the first time in six months, after a 5% drop from September to October, according to the Mortgage Bankers Assn. (MBA). By late December, applications had plunged to June, 2002 levels. The MBA expects mortgage originations to fall by 18.6% in 2006."
"Even the industry's boosters are getting nervous. 'There's no doubt that we're transitioning to a more challenging environment,' says Richard H. Wohl, CEO at IndyMac Mortgage Bank. Lenders' earnings have already begun to fall. 'Profitability in the industry is down, and over time that will take its toll,' says Doug Duncan, chief economist at the MBA."
"During the past few years, the industry built up enough capacity to pump out $3 trillion worth of loans a year. Now retrenchment is in the air. The first real whiffs came in November. The nation's largest mortgage bank, Countrywide Financial Corp. closed two loan-processing centers and eliminated 300 jobs. National City Corp. trimmed 70 workers at its mortgage business and hinted at more to come. Ameriquest Capital Corp. cut 1,500 people."
"The trouble is, the spread between short-term and long-term rates is narrowing. In fact, on Dec. 27, the yield of the 10-year Treasury note briefly dipped below that of the two-year Treasury bill; a year ago, about two percentage points separated the two. The smaller the spread between the two rates, the harder it is for lenders to make a profit."
"It gets worse. As mortgage demand has slowed, price competition among lenders has heated up. 'There are some competitors who are pricing irrationally,' says Stephen J. Rotella, chief operating officer at Seattle's Washington Mutual Inc."
"The result of these forces: a shrinking pie of less-profitable loans. In October, National City said third-quarter home-loan profits tumbled 91% from last year, to $13 million. In November, tax preparer H&R Block, blamed a $72 million loss in its fiscal second quarter (since revised to an $86.3 million loss) on a 44% annual drop in pretax income at its mortgage unit."
"At especially high risk: lenders that have sold lots of mortgages to so-called subprime borrowers with spotty credit records or unstable incomes. Some of these borrowers have escaped default in recent years only by refinancing at higher home values and lower interest rates. 'If real estate stops going up, the opportunity to refinance because of a higher value is going to go away,' says Michael Moskowitz. 'That's going to hurt companies that were doing bad business.'"
"Some lenders also face the consequences of the exotic-mortgage binge that has intoxicated borrowers for the past few years. Problems with option mortgages are already arising. In the third quarter of 2005, the amount of such mortgages available for sale to institutional investors from New York's MortgageIT Holdings Inc. swelled to about 30% of the company's total inventory."
"Those mortgages carry a low introductory rate of 1% in their first month, which is usually how long MortgageIT owns them before selling them. That 1% rate brings in less money than it costs the company to finance the loans with short-term borrowing. Yields on loans held for sale fell during the third quarter, costing MortgageIT about $18.3 million. If short-term rates keep climbing, yields could drop further."

[bigq]

with out reading the rest of this thread.......
I was walking my dogs last night and noticed a house one block down that is for sale. So I stopped and picked up a flyer.
Now this house is just a tad smaller then mine. It looked nice and very tidy.
Located on Indiana street in Anaheim it's under 1,500 s.f. with 3 br, dinning room, living room and 1.5 bath and detached 2 car in the back. To me that's just a small modest house. Nothing more, nothing less.
Now just to compare mine is close to the same but I have an extra half of a lot. (guy next door has the other half) and I have a second 2 car with a nice driveway in the front sitting on that area. So I have a 2 car in the back and a 2 car in the front as well. I have over double the back yard too.
I paid 184K 6 years ago (prolly an extra 10 ~ 15K for the extra land & 2 car at the time). Well this place down the street is listed for over 630K!!! Now I understand that's what it's listed at and it could sell for less. But I bet it's not much less. Now it that's showing a 42% drop I can live with it!
I think your kidding, but 42% is the drop it should take to be inline with income and normal appreciation. The drop has not happen yet and some think it won't. At that price I would guess someone needs to be making close to 175k a year and that is just above the so called median price? Even a 42% drop is still around 360k for that house, which is still a nice appreciation considering what you paid 6 years ago.
So when you moving up SD?

[Big Warlock]

I guess the first issue is the original source of info. Was it the LA Times? Take the source.
2) If there is a bubble burst, it will occur in California. I just spent the New Year Holiday over there and princes seem to be going in one direction.......up. Is there a bubble? Maybe. Indicators have changed and inmproved over the years. Demand to live in Ca. has been exceptionally strong over teh past 20 years and the population continues to grow despite tales of those leaving for Arizona and other places east.
3) Short term interest rates have nothing to do with mortgage rates. Treasury bills. Especially 15 year bills. The system is pretty simple. They borrow and then lend it out. They keep rates low by an unbelievable low overhead and computers allow for that.
4) The population of people over the age of 60 conitnues to grow and fuel a transfer of people from the midwest and east coast to teh west. That isn't going to stop.
5) There is an additional 20 years of growth going to happen in Az., Ca. and Nv. Enjoy it while you can.
6) ROI on a vacation for $7K or a boat for $4 / year in payments is priceless.
7) Some debt is good. Without debt, you are paying additonal taxes to the government instead of utilizing your debt and equity to create additonal opportunities in Capital investments and appreciation of said property.
My .02 worth

[superdave013]

I think your kidding, but 42% is the drop it should take to be inline with income and normal appreciation. The drop has not happen yet and some think it won't. At that price I would guess someone needs to be making close to 175k a year and that is just above the so called median price? Even a 42% drop is still around 360k for that house, which is still a nice appreciation considering what you paid 6 years ago.
So when you moving up SD?
I was not kidding about one thing in that post. Now I don't know squat about the RE market other then what I learned from buying ONE house and making that monthly payment.
With that said I don't know how I could move up unless I move out of the area. Sure I could sell for a tidy profit but then what? I'll just stay put with my modest house, used and 100% paid in cash Schiada and just enjoy life the best I can. I hear ya about that 175K. But then again when I moved to Anaheim it was because I was just like all the other first time buyers on my street. (4 of us moved here the same year) All of us bought in Anaheim because Fullerton and Orange was out of reach. Now I hear (and see) that Anaheim is out of reach and first time buyers like me are moving to La Habra now.

[NashvilleBound]

As much as these clowns dont mention my subdivision(political games I do not play) our market is still going up....every day.... But of more interest to you West Coasters....check out our pricing.....
Housing boom
New home construction continues at torrid pace in county
By ERIN EDGEMON
edgemon@dnj.com
But he now expects he will end up settling in the Blackman or Cason Lane area. Big Fella said he can get more house for his buck in those areas than in northern Murfreesboro.
"I just found what I was looking for in my price range," said Big Fella, also known as Willie Sims Jr.
He especially liked what he saw in Blackman Farms. "That is the place to be," he said.
Actually, there are quite a few places where folks want to be in Rutherford County. Home building across the county reached record highs in 2005 despite rising construction costs, property prices and mortgage rates for buyers.
"The market is growing on an annual basis, and it is producing more homes now than it ever has," said Edsel Charles, president of Marketgraphics, a Brentwood-based market research company.
Through October, building permits issued for single family homes were up 6 percent over the previous year. Likewise, sales of new and pre-owned homes were up 13.4 percent over last year through November. Construction of multifamily units dropped 16 percent from the previous year.
Almost every single home built by the largest home builders in Rutherford County is sold before construction is finished. The average home sold in Murfreesboro through November was 1,830 square feet and sold for $161,317, according to the Middle Tennessee Association of Realtors.
"There are still many people moving to Rutherford County," said Mike Lilly, senior vice president of development at Ole South Properties.
Newcomers are attracted to the county due to its 7 percent job growth, low property taxes, affordability of homes, good school systems and proximity to Nashville and major interstate systems, said local officials, even though the price of homes went up about 15 percent during the year due to rising land, development and construction costs.
Experts expect home building to remain strong next year as long as interest rates stay low into 2006.
Home building continues to be strong, said Scott Mason, real estate agent with Bob Parks Realty, simply because people keep moving here. They are moving, he said, because Rutherford County is centrally located within the state and the rest of the country and is close to major interstates. Additionally, new jobs keep being created and the cost of living here is significantly lower than in Williamson and Davidson counties.
Vermont native Lisa Welch started looking for a home in Middle Tennessee in May so she could be close to her grandchildren. Finally, she and her partner, Andy Elder, purchased an existing Smyrna home resting on 10 acres off Central Valley Road.
Acreage was important to the couple, but it was hard to find. They looked at homes in Mt. Juliet, Lebanon, Smyrna and Murfreesboro for five months before finding the perfect house on a hill and surrounded by trees.
Welch said the location is convenient to shopping and to her job as a nurse at the York VA Medical Center in Murfreesboro.
She's among an influx of new residents to Rutherford County whose demand for new homes is actually outpacing home construction, especially in the Smyrna and La Vergne markets.
Charles said those areas of the county are closest to the Nashville market, which so far has been unable to produce enough lots at an affordable price.
The market could expand by 30 percent to 40 percent if the land was available, Charles said, but the lack of lots will not cause home building to slow.
Hotspots for home building in the city of Murfreesboro are concentrated west of Interstate 24 in the state Route 96 (Old Fort Parkway) and 99 (Salem Pike) corridors and the Salem and Blackman communities north of I-24, said Matthew Blomeley, city planner.
More than 20 subdivisions are being developed or have homes under construction off state Route 99 and state Route 96.
These areas will continue to be the most active in the city for several years, he said, because of the amount of land available for development. The extension of the city sewer system to areas west of I-24 also made the property desirable, Blomeley said.
Candy Roberts, executive vice president for the Middle Tennessee Association of Realtors, said the homes in the state Route 96 corridor provide convenience and a country lifestyle for residents.
"As more retail options open up in that area, convenience is even more enhanced," she said. "Building sites accessibility came because infrastructure was added."
Roberts said it is the same for the state Route 99 corridor.
"People wanting the rural feel, larger lots with less density fit these areas well," she said.
Subdivisions such as Birkshire and Savannah Ridge have been popular within the Siegel school zone in northern Murfreesboro.
The Eschenfelders moved to Primm Springs subdivision on Twisted Oak Drive, in the Siegel school zone, in early 2005. The family moved from Birmingham to Gallatin and soon started construction on a 3,000-square-foot home in northern Murfreesboro to be near family.
Tonya Eschenfelder said the new home is much more affordable than homes in Birmingham. She loves her family-oriented neighborhood and its proximity to shopping.
By the end of the year Ole South Properties, the largest home builder in Tennessee, expects to close on 700 homes down about 74 homes from 2004.
Mike Lilly, senior vice president of development at Ole South, said the decline in construction is not due to a slowdown in the industry but the lack of developed lots.
In 2005 Ole South and Greenvale Homes, the largest home builder in La Vergne, started building more mid-level homes ranging from $160,000-$300,000 because of development costs and the price of land. Lilly estimated Ole South had seen a 15 percent to 20 percent increase across the board on the cost of a new home.
Because of rising home prices and increasingly busy lifestyles, townhouses are starting to replace starter homes. Lilly said more people aren't wanting to maintain a yard and the exterior of their homes.
Townhouses, specifically those beginning to pop up in the Blackman and Siegel areas, are becoming increasingly popular especially to first time home buyers not wanting to shell out $160,000 for a starter home.
With land costs growing, Roberts said smaller lots for building townhouses provide a better return on developers' investment.
"With affordable loan programs that open options for more first-time buyers, single owners and investors, townhouses are a very desirable product," she said. "Many homeowners want the pride and protection of having the tax benefits of ownership, without substantially higher maintenance costs or responsibilities."
Lilly contributes Ole South's most successful subdivisions, Indian Creek, Evergreen Farms, Barfield Commons and St. Andrews Place, to their proximity to Interstate 24, good schools and shopping. Ole South's most popular products were 1,600-square-foot to 1,700-square-foot homes ranging from $160,000-170,000 or a standard townhouse without garages.
Greenvale Homes saw a revenue increase of 30 percent and a 20 percent increase in home closings over last year, said Steve Dotson, co-owner of Greenvale Homes. The company expects to close on 350 homes totaling $50 million by the end of the year. Next year, Greenvale Homes will shoot for 400 home closings increasing revenues by another 20-30 percent.
The best performing subdivisions were Lake Forest Estates and Stones River Cove in La Vergne and Florence Green in Murfreesboro.
Jennifer Hollingsworth, real estate agent for Greenvale Homes, said Lake Forest Estates is popular because of the variety of affordable homes starting in the low $100,000s.
"Lake Forest has great affordability for us," she said. "It is the best value in new construction."
Hundreds of homes are planned for the massive Lake Forest Estates subdivision currently made up of more than 3,100 homes.
Lake Forest Estates and Stones River Cove, featuring homes starting at $140,000, are located close to large employers in the area including Whirlpool, Bridgestone Firestone, Ingram Books and Nissan.
Dotson said Greenvale Homes is currently in the position to grow over the next couple of years. The company has pre-bought lots in Lake Forest Estates and several hundred acres in the Antioch area, where the company plans to build as many as 1,700 homes in the next five years. The first homes in the Brookside subdivision off Carothers Road in La Vergne opened in November.
David Penn, director of the Center for Business and Economic Research at MTSU, said it is anybody's guess what will happen with mortgage rates in 2006 and how it will affect home building next year.
Mortgage rates, which has plummeted for several years, began edging upward in 2005. Rates were at 5.7 percent at the first of 2005, dropped to 5.6 percent in June and increased to 6.3 percent in November.
"Historically, that is still very low," Penn said.
Interest rates will go up next year and home prices will go up by 10 percent, Dotson predicted, but because of the job diversification in Middle Tennessee the home building market will remain steady.
According to the National Association of Realtors, 2006 is expected to be as strong in home sales as 2005.
"In light of the catastrophic weather issues of other markets, Middle Tennessee looks very inviting for those displaced from their homes anjobs in the Southeast," Roberts said. "We are seeing a growing number of out-of-state investors, buying properties sight unseen, because they recognize the strength of our area. With quality jobs, education, medical services and affordable prices for most incomes, we should see increased home sales."
Big Fella hopes to have a four-bedroom home to support his growing family constructed in Blackman Farms for around $210,000, but for right now Big Fella is waiting it out in his Murfreesboro apartment.
Since opening in July, 58 homes have been sold in Blackman Farms, a 450-home subdivision located off Old Fort Parkway, 1.2 miles from I-24.
Centex Homes, subdivision developers, hoped to have a dozen homeowners living in Blackman Farms by the end of 2005. Homes range from 1,656 square feet to 3,011 square feet. Neighborhood amenities include a playground, an acre playing field, 48 acres of open space, landscaped entry monuments, sidewalks and streetlights.
The neighborhood will be completed in four or five years.
While Big Fella is anxious to move in, he said he decided to stay in Murfreesboro because the city has been good to him, and he appreciates that most local schools are filled with children from diverse socio-economic backgrounds.
"I love Murfreesboro," he said. "It is a beautiful place."

[HM]

I just read an article in the WSJ, in which a representative from the National Real Estate Association predicts more of the balloon deflating, vs. popping. December still set new records and 2005 may have out paced 2004. While inventories increased, so did home values, which is not expected to last long, but will continue while demand outstrips supply.
The segment that will be hit the soonest and the hardest is condo's. But, then again, they were still on record pace.
Everyone is expecting it to burst because they can't see how the values can continue at record pace, and the real estate market has a history of popping do to reactionary response of the market.
Southern California still has a major shortage, especially San Diego, where it is close to a 8:1 ratio of demand vs. supply.
Who knows....I am positioned to win either way, both with my company and with my personal finances. I do stuff a little less conservative than the "pay cash" group, but the "pay cash" group will always do well. Just some of us believe in using OPM(other peoples' money) - just like the banks, and make money through arbitrage, which is a great way to go. It appears riskier to the untrained eye, until they realize who's money is really at risk.....OPM. I believe you either pay cash or finance 100%. I believe the "in-between" is really the riskiest position to be in - you have equity, but the lender has all the leverage on the equity. Since they get all the leverage..give them little to no equity.....they are much more willing to work with you when times get tough when they have everything to lose, and nothing to gain. It is quite alright if you disagree. But, it works for me and my clients. And it seems like the larger the client I have, the more interested they are in OPM. They tend to like to tie up their cash in more liquid and protected assets.
Nashvillebound has a great strategy. He pays cash, then gets a LOC - which creates liquidity. And most of all, it works for him. There are many ways to skin a cat in this industry, which is really cool as everyone has different comfort levels on risk, so they have lots of choices.
I don't care what the market is doing, as I will always be looking to buy and make money in the long run. While I am newer to the industry, I have key alliance's with guys who have been doing this for 16 years and longer. Their biggest losses have been attempts at short term gains. And their best successes have been sound long term strategies. And best of all, they don't just sell their concepts, they buy their concepts - and is key to why they are so successful. They show clients exactly what they have done, and how well they have performed, and where they learned their lessons.

[wsuwrhr]

You can go to the Sun City house. just wait out back......I'll be there soon......Honest :rollside:
Great...I'll need directions then. Preferably city streets please.

Brian

[totenhosen]

ttt

[al cole'holic]

..why don't we just have the moderator make this a sticky...then we can argue all year long