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

  1. #31
    Jeanyus
    They say the real estate market is fueling the economy. If thats the case, then things are going strong as ever. I had to wait in liine to get in the parking lot at the mall this year.
    I have been building houses in Ca since the early 70s, the bubble deflated in the 70s seems like it lasted about 4 years, it deflated in the late 80s, it lasted about 1 1/2 years. Real estate slowed down for about 3 weeks in December, that is probably the buble burst everyone is talking about, things are active again.
    Supply and demand, where do you think all those people in line at the mall are going to live?

  2. #32
    Mrs. casean
    As far as I know there are very little if any homes being built for the first time homes buyer in OC.
    That's for sure! I grew up in OC but we couldn't afford a house (that's worth living in considering the area) for our first home so we are "over the hill" as I always say... in Temecula Now most of these homes are around half a million! Nuts! It's amazing that a new home around OC is not less than $700k-$800k! I couldn't imagine spending money on a house for that much. But many do. My dad sells homes in Ladera Ranch and sold one to Warren G and now Snoop Dog (it's funny!) is looking at the houses! But these houses are around 2 million! Crazy!

  3. #33
    dirty old man
    I use the same phylosophy (sp) in stocks and RE: buy lo, sell hi

  4. #34
    Havasu Cig
    It runs in cycles. Seen it over the last 30 years. Prices increase, prices fall. People need creative financing in the middle of the rise because they can not afford the home in real money. When the bubble gets a hole in it, prices fall. Prices fall farther. The decline lasts between 7-10 years, little ups but usually downs. Early on it was balloon payments, this time it was neg. am's and interest only's. These people usually bust and fuels the market decline. Anywhere from 25% - 45%.
    But .... eventually, the market begins to fuel itself and housing values start to go up. How much? Hasn't been as consistent as falling except for this time. You have to remember that when the housing market exploded, interest rates were being lowered and held down by Greenspan to help Bush's economy after Clinton left. You don't usually see interest rates at 5% or lower. These rates were not market driven but artificial to help the economy, which it did. The price we will pay is yet to be seen.
    Remember .... nothing is forever
    The rates are the main reason that real estate has been doing as well as it has, along with creative financing and fraud in the mortgage industry IMO. The rates were lowered and held at such low rates after 9/11 to save the economy. Now the rates are climbing and need to do so in order to curb inflation. A lot of people bought a payment on an ARM and are going to be screwed when they have to Re-Fi. They did not look at the cost of the house, just if they could swing the payment for the next few years.
    Anybody that thinks real estate is going to keep climbing is crazy. My father was a developer and lost a lot of $$$ when the market crashed in the late 80's and early 90's. A lot of people were trying to get out of the homes they had bought from us because of the drop in the market, and filed construction defect suits. He did not lose one case, but the lawyers fee's were in the millions. On top of that he ended up hanging on to some stuff we built for years until he could sell it for a reasonable price. He actually does not think it will be as bad this time, but I think it could be worse. At least in those days people were actually puting real cash down and if they walked away they would lose it. Today a lot of people are going 0 down which IMO makes it easier to walk away.
    There are a lot of people out there that are 100% financed (or more) with interest only loans and a lot of those loans were obtained on stated income. This is where the fraud comes in. I personally know people that own several homes on paper, but don't actually own anything. They think equity is money in the bank and are spending it like it does not have to be payed back. We own a House here in San Diego, A house in havasu, and an interest in a water front cabin on Lake tahoe. My total debt against those three properties is about 300k and the value is about 3 million. I could have went out and cashed equity like everybody else, but I would rather have my stuff payed off 15 years from now and not have to work. I think A lot of people are not looking down the road when they are paying interest only on a 30-40 year loan. Do you want to work until the day you drop dead? For the people that are buying boats, cars etc...with equity, I think they are even worse. My.02.

  5. #35
    4DAY4PLAY
    The rates are the main reason that real estate has been doing as well as it has, along with creative financing and fraud in the mortgage industry IMO. The rates were lowered and held at such low rates after 9/11 to save the economy. Now the rates are climbing and need to do so in order to curb inflation. A lot of people bought a payment on an ARM and are going to be screwed when they have to Re-Fi. They did not look at the cost of the house, just if they could swing the payment for the next few years.
    Anybody that thinks real estate is going to keep climbing is crazy. My father was a developer and lost a lot of $$$ when the market crashed in the late 80's and early 90's. A lot of people were trying to get out of the homes they had bought from us because of the drop in the market, and filed construction defect suits. He did not lose one case, but the lawyers fee's were in the millions. On top of that he ended up hanging on to some stuff we built for years until he could sell it for a reasonable price. He actually does not think it will be as bad this time, but I think it could be worse. At least in those days people were actually puting real cash down and if they walked away they would lose it. Today a lot of people are going 0 down which IMO makes it easier to walk away.
    There are a lot of people out there that are 100% financed (or more) with interest only loans and a lot of those loans were obtained on stated income. This is where the fraud comes in. I personally know people that own several homes on paper, but don't actually own anything. They think equity is money in the bank and are spending it like it does not have to be payed back. We own a House here in San Diego, A house in havasu, and an interest in a water front cabin on Lake tahoe. My total debt against those three properties is about 300k and the value is about 3 million. I could have went out and cashed equity like everybody else, but I would rather have my stuff payed off 15 years from now and not have to work. I think A lot of people are not looking down the road when they are paying interest only on a 30-40 year loan. Do you want to work until the day you drop dead? For the people that are buying boats, cars etc...with equity, I think they are even worse. My.02.
    Yes i do......im a fireman i love my job! And if im tired or sick, i will retire at 50 years old with a 100% pension.....thanks Gray Davis.

  6. #36
    HighRoller
    It's amazing how people have lost their minds because of the housing market being good. Even if you make twice the median income in Cali, which would be $120K, you still shouldn't even think about buying a $550K house according to a 30% maximum income/payment ratio. Anyone who can use a calculator and read can see that "affordability" loans are financial suicide! The crash that is coming (and financial indicators show that a slowdown is coming) will start with a modest decline. But those with garbage loans will sink under even modest pressure because they are over-leveraged and have no savings. We all know what happens once a snowballl starts rolling downhill...
    And as far as Havasu and other neighboring states, people who have used their equity to buy a second home who are faced with being suddenly upside down in their first will dump the second home to save their asses. Yes, rational thought tells us that if you hold on to your assets the market will eventually recover. But the stock market and real estate market crashes of the past tell us that rational thought takes a back seat to panic when it hits the fan.
    You can argue whether a correction is coming or not. But face it; we are all talking about it already. That's how changes come about. Talk turns to action (or inaction) and the snowball starts rolling very slowly...

  7. #37
    totenhosen
    You can argue whether a correction is coming or not. But face it; we are all talking about it already. That's how changes come about. Talk turns to action (or inaction) and the snowball starts rolling very slowly...
    Agreed! Like I said the one intangible to keep the market going is the public's perception. And it seems perception is changing.

  8. #38
    superdave013
    well all I know is that if it drops 42% and I sold on that very day......................................
    I would still be WAY ahead.

  9. #39
    HM
    It was in the LA Times....so take it with a grain of salt. Yes, the sky is falling.
    The last big artice from the L.A. Times on mortgages talked about the all the people getting into the Neg Am loan because they couldn't afford a regular loan.....which is not what is happening. If they can't afford for a regular loan, then they DON'T qualify for the Neg AM as the borrower has to qualify based on the internal rate, not the minimum payment rate. The real problem is all the fraud being committed by loan officers who are stating thier income higher so that they qualify.
    HighRoller: DTI range from 36% - 45% on A/Alt A paper loans and go as high as 60% on Subprime. And, there are ton's of loan products that don't even look at DTI. Don't know where you got 30% from.

  10. #40
    HighRoller
    I was talking 30% as in mortgage payment only, not total debt. Personally, I guage affordability on "take home" pay and would never have a payment higher than 25-30% of take home. But I'm conservative and I know lenders nowadays are willing to go further out on a limb to get people financed. You're right about fraudulent lending practices. But in the end, they will reap what they sow. They got the commission up front, but they'll get the house back one day in return when the owner defaults.

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