home prices

[Huubster]

what do you guys think of the recent boom and bust with home prices? how bad has it affected your guys area? Ive seen some crappy homes in crappy neighborhoods spike up two times in value about a year or so ago...

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[jdm]

Boom, yes. But right now bust is a bit of an exaggeration.

Seeing the price of a house whose price has risen between 25 and 40% over the last few years fall 5% is a correction, not a disaster.

[tilesnake]

My area, Chicago your seeing longer times on the market but people are still getting pretty close to there asking price but I bet that changes soon-to many people are trying to cash out and its creating competition in the market and that will lead to lower prices among other conditions.

Pat.

[sdaniels7114]

There's been a much bigger correction up here. October home sales were 25% off from this time last year. Of course, two years ago people were offering 10-20% over asking price.

[Big AL]

I have been into house flipping last few years.
(NW Indiana and Southside CHicago)
I have mostly concentrated in areas that are considered lower middle-class.
(Tilesnake should be familiar with Hammond area)

Anyway, I have recently liquidated everything because I am squeamish about this market.
I have seen houses in Hammond average around $115,000 for 3 bed, 2 bath with finished basement. Now, you are lucky to get $95,000.
In fact, appraisers are tightening up too...way up.

The problem with the lower end of the scale where I operate, is that during a correction period, those buyers tend to opt for renting rather then buying.
When interest rates were low (5-6% range) a buyer could get into one of my houses cheaper than rent....but now, that has shifted.

Anybody else with similar opinion?

[gary]

I do the tile in spec homes, some of the houses have been sitting over a year. I am in the north suburbs of chicago. :think:

[darvin kuehl]

Take a look in Michigan, with 20% unimployment, things do not look good ! Great time to buy, not sell. MobleHomes are about all thats selling in my area, and that Sucks ! We need a few more.toronados I guess.

[tileguy_n_ky]

Things are starting to slow down some. Interest rates are still good in my area (central KY) and people are still buying. Though there does seem to be a small segment of the market that is kind of flat. Houses up to about $200k and then over $500k are still being built, though not as fast as before. The $200k t0 $500k seems to be dead. In fact, there are a couple of new subdivisions in this range that there has been no movement on in 4~5 months now. My area has turned into a buyers market, there are a lot of promotions going on right now especially in the dead segment. In fact, my wife and I feel that now is the time to move into a larger house. With my daughters arrival in August, we have quickly out grown our 1100 square foot house and need a little bit more room. We are going this weekend to look at some spec homes for a builder that I do work for. He is offering 20% off to any sub that completes a purchase by Dec. 30.

[Shaughnn]

Well, after 6 months on the market without a bite it looks like we've finally coaxed a buyer into our old house in California. We had to shave about $80,000 off of the "market value" to get this first offer but we should be closed by the end of next week. It'll sure be nice to not have two mortgages due every month. (where's the fingers-crossed smiley?)
Shaughnn

[John K]

Shaughnn,

Good luck to you! That will make a great Christmas gift. :tup2:

[opiethetileman]

Pirate I would cross my fingers for yeah but I have lost most of them. Yeah market is tough here as well. I bought 4 houses in january. Paid cash for all four. I have sold 3 and have still sitting with material in it that was loaded up 4 months ago. It took almost 6 months to sell one of them. The first of the year was good had one flip in 9 to 10 weeks. its just a bad game of chess with home flipping rite now.

[Tom Tee]

What really concerns me is the next rate adjustments, and the payment reset adjustments on option mortgages. These OM's were great in a steadily/rapidly rising market but now they will accumulate negative equity each month with stale or falling RE values.

OM payments will be reset @ aprox. 250%+ their current rate.

The OM was designed for those w/ comdfortable capitol who invested the spread. However many got into these homes w/ no down and no extra room in their budget. Many mortgage brokers are like attorneys, no heart.

I read somewhere that the OM market did something like a 3 or 4 fold increase in volume recently. Think is was Business week couple mths ago. Gotta be an increase of forclosures around the corner.

TT

[Shaughnn]

Tom,
Rest assured that the bankers want to do whatever they can to help people avoid the pitfall which the bankers built for them. Recent articles point to a grave fear amoung the banking industry that they won't be able to shoulder the burder of all of the forclosures they are now expecting and so there is a great incentive for the banks to "get creative" about keeping the property out of their books. I think greed drove them to influence the feds in this direction, never imagining that they'd sell out the American people to this extent. Great market coming up if you are a real estate speculator and have a lot of liquid capitol to invest. Oh! That couldn't have been the plan all along, could it? :drevil:
Sahughnn

[flatfloor]

Tom, what's an option mortgage, same as an adjustable rate?

Shaughnn, the banks will get screwed again just like they did in the 80s. I guess they don't teach history in bank school.

Hey! I just noticed you misspelled your own name. :bonk: :lol1:

[Shaughnn]

Yes, Jim,
But the "Bank Owners and Partners" will reap an immense inventory of property and real estate. Who cares if the institution goes belly-up. It's all federally insured and they are insullated from any responsibility by a "corporate veil". They are playing Monopoly with public money and the property prices have just started rolling back to "game start" prices. It's gonna be a feeding frenzy for the affluent. Good thing those tax cuts and revisions to bankruptcy laws were put in place in anticipation for the fall, isn't it. :drevil:
Shaughnn

[flatfloor]

It's all federally insured

Not so.

Banks don't really like being in the real estate business. Back in the 80s they found themselves with lots of empty houses on their hands and money tied up in them. Money that should have been out earning money. Quite often you could walk in, ask if they had anything they wanted to unload, make a decent offer and they would give you a mortgage to get rid of it.

Too many bad loans on the books and loan officers found themselves unable to meet their mortgage payments.

[tilesnake]

I guess I'm missing something obvious but I don't see any great deals coming down the foreclosure river when 98% percent of them have had almost no pay down and on top of that prices are falling in most markets. I went to the local foreclosure auction and there where a glut of houses for sale but hardly any bids because there is no money to be made on them.

Pat.

[Shaughnn]

Jim,
What part isn't federally insured. The bank's assets or the bank owner's investments. Like I said before, "who cares if the institution folds". It's just a storefront for the lending individuals who are completely insulated against "real" loss. Can anyone else taste "1929" just around the corner. :yummy:
Pat,
The market isn't soft enough and the people who will be reaping this market don't go to public auctions. If it's available to the public, it's already been picked over. And who cares about "Joe Schmoe's house" when Joe was foolish enough to use his manufacturing facility for collateral? How about all of the private capitol which has been sunk into these failed investments. The people who hold them now can't afford to keep them but the investment is still in the property. The "interest" is fictional and is the first thing written off at a foreclosure. It's like missing the final payment on your pawn ticket by one day. Who cares about "late payments" when you've got complete ownership?
Shaughnn

[Big AL]

Jim,
An option arm mortgage is dangerous.
It gives the homeowner the option of paying each month either: Interest + Principle, or, Interest only, or, Minimum payment (like a credit card)
As mentioned, the idea is that someone pays the minimum payment each month, and invests the extra money into other capital ventures.
problem is, lots of folks used option arms to get into houses that were way way over their budget to begin with.
usually the arm runs out after a period of time like 3 years, and at that time the rate goes fixed for like 30years. (high rate too...usually prime + 1 or 2)
If the homeowner has only been paying the minimum payment for 3 years, then they actually owe more now then when they started and their payment will go up 250% as in Tom's example.(the payment goes up because they owe more on the house overall, and because they now have to make regular conventional-type loan payments monthly....a double whammy!)

I'm lookin' forward to the foreclosures!!!!
BTW--the banks won't lose out IMO...they are smart.

[flatfloor]

The investments (mortgages) not all are FHA loans.

[tilesnake]

My understanding is that the banks where giving away mortgages like credit cards with no "manufacturing facilities" backing them and now what?. I guess I feel to big of a bomb has been dropped this time and where all going to feel it.

Pat.

[Shaughnn]

Pat,
I used the analogy because it was the first to come to mind. What I was trying to say is that there is huge wealth hidden in this pending national tragedy and I don't really think that it's accidental.
Shaughnn

[Tom Tee]

to complicate things, due to steady and some what long period of RE value appreciation, mortgage co's in this area were offering as high as 125% of value with 110% of value common, thinking that real soon that would be the actual value. Sue-prise! Now What?

One example. 30 yr conventional mortgage $4600 month, w/ option it would run $1650 apx.

Joe Blow qualifies for $1700, he and Mrs Blow move in....few years later the OM resets to apx $4700, actually higher than a conventional mortgage. The interest adds on very rapidly and the home prices are falling. Now the Blow hards in their fancy home have to go into debt about $40,000 to $80,000 to get out.

They once qualified for $1700 but now are out with possibly scars on their credit score. They are making payments on a $$$$$$$ loan for the short fall payoff and struggle to find a small house or apartment.

Additionally, how much grief do you think Mr Blow is living with?

The near future will be interesting.

One thing that has helped me is that 15 years ago I left the up and out high end Phila. "Main Line" slow pay communities and started to concentrate on low-middle income clients. These are the very best of the best. The pay up front, they know what hard work is all about and they respect good honest, clean work. And can be very realistic when difficulties come along.

TT

[Tom Tee]

[url]http://www.businessweek.com/magazine/content/D6_37/b64000001/.htm

SORRY.....

Can not get the link to hook up. You can read this by;

Googling "option mortgage problems"

and scroll down to second entry and click on " Nightmare Mortgages"

Sept 11 Business Week Mag. Interesting read.