real estate - crisis in the making

[ChairmanAgnostic]

resale of older homes has not been slower in recent history. The housing market is seeing prices fall and times between listing and sales lengthen drastically. And yet, Tony Snowjob claimed today that the American Economy has never been stronger.

What happens when the real estate market starts tanking?
a) people cannot buy new homes. Investment in housing materials falls, the suppliers order less and dig deeper into inventory rather than order more.
b) people try bridge loans - always a potential disaster.
c) municipalities lose out. Real estate taxes on sales of existing homes provide counties and municipalities with great, steady earnings and incomes
d) the older houses, with older fridges, washers, flooring, lights, roofs don't get improved. That puts Home Depot, Ace, and other suppliers on their heels.
e) financial institutions make money in funny ways. One way is churning - selling off existing mortgages to other companies, and profiting from your paying your bills on time. if there are no new mortgages, that revenue source dries up.
f) muni tax base. With property values falling in real terms, the tax rates will fall.
g) equity loans. Here is the real killer. When the values fall far enough, formerly secured loans become unsecured. Either they call the loans in, forcing homeowners deeper in trouble (since all of the above has already affected their job security and income) or the home owner, seeing no value in his house, simply walks away. If his loans exceed the value of the house, let the bank deal with it.

in other words, Tony Snowjob is full of it. Of course, I can understand why he wishes to avoid a panic. Last night's wall street and NYSE results were bad enough.

[libodem]

1. so much of the new construction around this town

is of the fancy gated-community type. I hear radio ads cheerfully stating that the prices are from 600,000 to 900,000. I thought it was bad that everything seems to start around 300,000. A new infill pencil house I stopped to look at was 250,000. When I'm working I make around 50,000 a year. I could potentially pay 12,000 a year for housing. That's 1,000 bucks a month for a house. What I'm thinking is if you had a 600,000 dollar house what would your house payment be? Even $3,000 a month seems crazy. How can an average family pay that much. What about a young family with a stay at home mom? What a lot of pressure on a young father. This economy seems artificially inflated from the top down. Food and gas are going up. The rest of us are already poor. If the stock market drops out the bottom and crashes and the Halliburton billionaires loose the value of all those inflated stocks...I'd be glad. Fuck them.

[Merlot]

2. The "haliburton billionairs" aren't the only ones who loose on stocks

All kinds of people now have their retirements in stocks and mutual funds. The billionaires will always have money socked away in some foreign company or other material assets. It's the regular investors that will be hurt if the stocks tank.

As for the morgtage, I've heard it said your monthly payment is approximatly $1000 for every 100K. So a 600K mortgage would have a $6000 monthly payment. Where I live, small 2 bedroom bungalows sell for 650K.

[ThomWV]

3. There is enough unfilled new rental housing in this area for twice its population

Someone is going to lose money big time around here - you can see it comming a mile away. Apartment complex after apartment complex, and not one single person's worth of increase in the local population.

My son lives in a very nice place he rents. New 3-story, full garage, three bath, hugh everything. Three quarters of the complex has not been filled since the day he moved in and he's in a very desirable part of town - and the owner/builder of the complex just skipped town and left the bank holding the paper. There have been a thousand new units just like his built in the last year locally, and none of them are rented.

[Desertrose]

4. same here.....lots going for over $500k and up...LOTS!

Most are $1 million and up ...for second homes....

Yet these are the same ones who want to kick out the guy who takes care of his yard for $8 an hour...like anyone can live on that here anyway...


Houses are sitting longer than I can ever remember here...older ones especially- probably because of the financing on older vs brand new.


I never made it into the housing market here....now its way way outta my price range.