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I think it may still not be the right time to buy.. I for one would wait a little more.
Many suggestions or remedies offered are just bandaids. What we really need is a good plague, something that kills off a few billion to get the Earth back down to a sensible population... Population is the over-arching factor in all of this...
Well my question is how will all of this be impacted when interest rates skyrocket? Seems to me it will only make things worse right?
I just have one question nobody wants to answer:
Why does anyone in their right mind believe that more than 51-54% of the population can AFFORD to or are entitled to own a home? When you start breaking down the demographics of our society, the aging less financially viable retiring baby boomers, and the extreme volatility of our economy over the last 15 years, it doesn't seem to take rocket science to figure out that there is no "right" to own a home and that there is no sin in renting.
Can anyone answer --
Situation I just thought of -- IRS charges debtors tax the difference between default and mortgage as income. Let's say $100k. That is considered income. Let's say debtor goes to BK court and discharges the debt, or never pays, or even if he does pay tax on it -- aside from that tangent, is the $100k then added to social security as income and odes it increase amount of social security payments monthly?
"Suzeanne researched this...!"
This is all true, Mad Hedge Fund, but posted on other blogs for at least 2 years. Are you a slow learner, or just waking up from a coma?
The developed countries economies are in fact in shambles and Real Estate no doubt has been pummeled world wide and especially for the USA in California, Nevada, Florida, Arizona and Michigan.
Real Estate is a local business. Period. There are opportunities that exist today that we have never seen and you can make a handsome return if you know what you are doing and have a lot of cash. I would venture to say that making money today in Real Estate is in many ways safer than playing the casino stock market right now.
Again, the only people that will profit in Real Estate for now are those who know what they are doing. Which is great news for those of us who play in that arena.
Actually I think the housing market is much worse than you let on and will drop much more than you suggest.
Demographically we're shifting from a semi-homogenous 80% white population/20% OTW population to a less than 50% white population, this will have serious implications on state revenues, spending, and even political agendas.
Those house heavy seniors wont be downsizing to just 10X10 senior care centers but 2X7 pine boxes, those houses many of which are owned scott free can be sold for less than materials cost, the demographic replacement buyer is much worse off than the previous owner.
I dont see housing remaining flat, I see it consistenly dropping in value over the next 3 decades without massive and sustained continuous flow of highly skilled and affluent Asian immigrants, and even then we'd still face limits to immigration levels. (like water electricity and political considerations, Latino gangs like La Raza may not welcome more educated more affluent Chinese immigration and opppose them, they dont like competition).
New materials, and new housing techniques will also drive down housing prices, the era of robotics has barely begun, the prefab houses that Edison designed have already become a reality, wait until we start building injected molded prefab homes and building drywall robots, and then there's the materials that haven't even been invented yet.
Just in the last 20 years we've seen substantial material replacements in housing construction, plywood was replaced by chipboard, copper plumbing replaced by pex tubing, aluminum & steel conduit replaced by romex and the list goes on & on and with every replacement the homes get more efficient and cheaper to build with less skill.
We need to import lots of Scandinavian women. Lots and lots. Then the problem should sort itself out.
For those who haven't noticed, we are in WWIII, troops in Iraq, Afghanistan and the Horn of Africa... Mexican border skirmishes, North and South Korea sabre rattling... terrorists trying to hit the USA.
Thanks for the update... very concise...
Nice summary. There are some other dynamics.
The effects of securitization on sales relative to price, and effects on bank solvency upon recognition of loss.
During FED (attempted) selling of its MBS holdings, in the price (un)discovery process, a transaction may occur but at a huge loss to the FED (I do not think the FED really cares if it takes a loss of not). Unfortunately for the market, this churning through will depress price even further. This is bad for anyone who has to recognize loss (once FASB rules are back in place), and other forgiveness of capital reporting requirements from FDIC (ending FY2011).
Into FY2011, once losses come back on the books, the sensitivity to price will be accute. The combined effects (writeoffs, loss of buyers, loss of credit, etc.) due to price decay will push many additional banks into insolvency. Obviously, this means Feddie and Fannie will need about $80B per quarter to keeps the lights on, to diligently record losses in the books.
you're smoking some funky stuff to come up with numbers like those.
share it, please.
Solution: Open up the borders, get all those new immigrants building new infra, wind farms, and tearing down slums with the incentive that they will be given one of the houses that no one can buy and upon which they will pay only an amount equal to 1/3 of the money they earn.
And what job will those new immigrants get? The ones that are being outsourced? Or the ones that have falling wages due to the heavy competition for jobs? Idiot.
I think they did that in Spain, I dont think it worked out too well, now they have expensive energy, rioting muslim slums that pay no taxes, and demands for free benefits paid for by the native tax paying population, not a formula for rising or even stable housing prices but a formula for decay, decline and eventually civil war.
"Open up the borders"
"Open up the borders"
Sure, but not in the direction most assume. I predict the U.S. will annex both Mexico and Canada within 25 years. We need the younger Mexican demographic to pay taxes, and we need Canada's resources. China will do the same with Australia and parts of Russia and Africa. The EU will be a federation of Islamic states extending into Africa.
Sounds good as long as we let in the right immigrants.
Not sure about your specific recommendation, but immigration is definitely the part of the equation people typically leave out in discussing housing and our long-term fiscal imbalances.
Plenty of people would still give an arm and a leg to move here. It's a policy lever that we will have to bring productive bodies and taxes in the future.
Like all those Canucks would rebuild Motown.
Renting sucks! The only people I hear complaining about owning a home are the ones that purchased one from 2005/2006 on. We've owned our latest home for about 7 years now. Even with the market "tanked" - the house and property are worth at least double what we paid for it. Even if we were at par or below, there is no way I could rent a place for the same amount of money. Owning versus renting brings stability into one's life. If it doesn't, then it's your fault that you over-extended.
For those worried about inflation, being a renter is just asking for trouble.
In August we will experience a new wave as there are mortgages resetting at that time.
If prices go down a bit more, the people posting here who are living in mama's basement will maybe move out. Mama would probably have to get a reverse mortgage on hers to pay theirs though.
Nice analysis bro. But you forgot one little fact:
Point well taken, but it ignores the composition of that population.
As he said, 85 year olds with chronic urinary and fecal incontinence aren't usually in the market for a new McMansion.
I suspect there will be a lot fewer retired boomers downsizing their homes than expected. A hell of a lot of those boomers' kids are coming back home after finishing school and being unable to find a good job, or the older ones just coming back to live with the folks after losing all or much of their income.
Further, you'll see more multi-generational households as it becomes more of a struggle just to get by. A lot of folks might form group homes for mutual protection if things get bad enough. The boarding house of yore could make a comeback.
I view this as a plus. There is too much isolation in this country.
Multi-generational living will mean much less demand for houses. Instead of the kids going off and getting their own, they band together and share. Hence, even worse for prices.
Multigenerational households are the historic norm over the last several thousand years of civilization.
The only areas it was not the norm was in frontier societies, be it the American frontier, the Russian Siberian frontier, the Scandinavian push in to the Saami homeland, or the Boers in to the svelt, etc.
The last 100 years in the Unted states has seen the final end of the frontier expansion and frontier infill mentality, expect the Untied States to lose this 19th and 20th century exceptionalism in the coming years as this understanding filters through society.
Also, expect the Chinese to increase their frontiers in to the depopulated southern third of Russian Siberia/Kamchatka,
In the summer of '08, we could see the writing on the wall, that O would be elected which would mean a financial disaster. So, since we had already lost confidence in the market, we sold all our investments and invested in our home. We paid off the remaining 14 years on our mortgage and then pumped the rest into badly needed repairs: new roof; new efficient heating & hot water system; more insulation, etc, etc, etc. We are debt free and pray our property taxes won't do us in.
Why would property taxes do you in? Your taxes will be based on the property value of your home - which will be going down because other properties will be dropping in value. It's comparative - not based on your mortgage - but the value of the home itself.
Remember - everyone else will have to pay their taxes on their home too - and they'll have to pay a interest and principal on their house. What's the big deal? If your mill rate on the house doubles, but your house is appraised at 1/2 the previous value - no change in fees paid.
In my area (Chicago Suburbs) a home's value is used as the numerator to the total area's value. Therefore if your house's values goes down, but so does everyone else's, then your taxes stays the same. here is the equation.
TotalTaxLevy * MyHouseValue / TotalRealEstateValue.
Unless your home moves down relative to the total of all property in your assessed area your taxes will not go down. The killer is really the TotalTaxLevy portion, It seems to climb 2 - 5% every year. Paychecks are stagnant.
My taxes on a 2300 sq.ft. home have moved from 5K to 8K in 12 years (60% increase). My paycheck has only gone up 6%. My property taxes are now about the same as my mortgage.
Assessors are tools of the gov't.
All gov'ts, big and small need beaucoup tax dollars.
So housing evals won't be going down fast.
You can take that to the bank.
"but your house is appraised at 1/2 the previous value - no change in fees paid."
Lol!!! You are joking right? I have had a 30% reduction in appraised value by the city but continue to pay a higher absolute property tax bill.
They lower the market value, but raise the tax rates. If the market value should happen to go up in the future, you can rest assured the rate will not go down. Real estate owners are sitting ducks when it comes to taxation. Due to property taxes, we are all renters.
I never said, or even implied, that our property taxes were based on our mortgage. We live in NYS where property taxes are outrageous. Our's have never gone down, only up, as well as our assessment, regardless of our home's condition, which deteriorated a great deal over the years. Now that we've improved our property, we expect our assessment to go up yet again. Right now the property taxes are manageable, but they will go up. That's a given.
NYS here also. Small town full of elderly so homes abandoned or vacant due to retirement or institutionalization. We never recovered from the eighties so no real job market.
I truly see no hope for my area. No one will bring manufacturing back. On the positive side we are a vacation area, lake and skiing. So some money comes in via those. Plus we are relatively service oriented, handicapped and elderly. That makes enough to hang on.
But if those houses don't sell or the land becomes vacant due to demolition there goes the tax base.
Small town here, too, and a tourist stop. Our area doesn't have many vacant homes, at least not that I know of. However, our village can not meet its budget and is seriously thinking of getting rid of our police department or face a 18.9% spike in village property taxes.
That only works if you understand enough to call the assessor.
We've called, we've pleaded, along with a lot of others, but to no avail.
Apparently you were so busy reading the writing on the wall about O that you failed to notice the Bush financial disaster. Remember Hank Paulson and the $700B TARP handouts to the banksters? Blame who you want but O is not the only person responsible for the mess we're in. Go find a fellow teabagger to talk to.
Au contraire, we noticed! Bush spent like a drunken sailor. We were livid about TARP. There is plenty of blame to go around in both parties.
OK kool dat den
Yep, the corrupt one party system.
Ah paying for your house is no different than paying for AAA beef instead of AA. You pay for the extras you want. Renting? Is that really better than buying - I'm not convinced from a price perspective, because you're always going to be paying for the current value of the home... but you have the option to move every year as prices drop the current landlord goes belly up and the home is foreclosed and resold to someone else who can afford to rent at a slightly lower value.
Personally - I don't want to have to move every year or two. I'd rather have a "cheaper" more modest home, that I've got paid off. It's like renting a cheap place but I don't need any income to maintain it. No - I'm not 70 either, but 32.
Also I'm not dependent on someone struggling to make ends meet to fix the refrigerator, air conditioning, roof, or furnace. If the landlord is in a tight spot you're in a tight spot come the next big broken thing.
And good luck getting your deposit back from a bankrupt landlord.
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