is this the housing bubble bursting?
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From: USSA
Yup.....credit tightening means less buyers able to get mortgages, meaning sellers will have their houses listed longer, which in turn may force them to lower their asking price and down come home values. This is just simplifying it, because there are other factors at play as well, but would take too long to type.
However, this is not the case just yet for upper-middle income and luxury homes, whose buyers are well healed and usually have excellent credit ratings.
However, this is not the case just yet for upper-middle income and luxury homes, whose buyers are well healed and usually have excellent credit ratings.
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From: Doh!!
Originally Posted by GPMike,Aug 9 2007, 12:21 PM
Yup.....credit tightening means less buyers able to get mortgages, meaning sellers will have their houses listed longer, which in turn may force them to lower their asking price and down come home values. This is just simplifying it, because there are other factors at play as well, but would take too long to type.
However, this is not the case just yet for upper-middle income and luxury homes, whose buyers are well healed and usually have excellent credit ratings.
However, this is not the case just yet for upper-middle income and luxury homes, whose buyers are well healed and usually have excellent credit ratings.
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From: IM SEXY
Originally Posted by S2020,Aug 9 2007, 12:44 PM
not just that but foreclosure number is increasing b/c of the interest rates resetting...
foreclosure market is gonna be the next biggest thing in real estate.
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From: Land O Lakes, FL
Glad as hell I got locked int a 30 fixed early this year. Was trying interest only for a bit. I agree that the lenders were giving loans away like candy. I qualified for much, much more than I could possible afford. But yeah, the market is cooling and lenders are becoming (rightfully so) more selective with their loans.
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Most of the "bubble bursting" you mention is the stupid financing that has been available. I am a Real Estate Broker and a Mortgage Broker. I have been in this market since 1974 and can tell you there is nothing new under the sun. I have seen this multiple times.
As someone said anyone with a pulse has been able to get financing and the people that either shouldn't have been able to buy or shouldn't have been able to buy with 100% financing or stated income, or bought condos/townhomes are the ones that are mostly defaulting now.
Stated income loans should be, and have until just a few years ago, been for people who are self employed or have an income that is otherwise different from the tax return. BUT a few years ago "they" decided, in their infinite wisdom, to allow salaried people to go stated as well. So a ditch digger could claim a $10,000 a month income to buy any house he wanted. Unfortunately he couldn't make the payments.
100% loans have been, and will be again, for people who have shown a willingness and an ability to pay. In other words not your first time homebuyer.
Traditionally condos and townhomes have a much more limited market than do single family homes AND the ability to resell your unit is dependent upon factors outside your control. If your HOA doesn't have reserves or has had large special assessments OR if you have too many investment properties in the project then people may not be able to get financing which means you can't sell.
The slow sales in the beginning of the year were, to a great degree, weather related. We've had some sucky weather and people just don't get out to buy and/or the builders simply cannot build in those circumstances. Here in Texas we have had the wettest year in recorded history. By the first of July we'd already had more rain than in a normal year.
What we are seeing in the financing market is a tightening of credit guidelines back to more reasonable guidelines. Look for this to stabilize in the next month or so.
Not everyone should be able to get every type of loan. Some loans don't make sense for some people's situations.
Wall street is betting the Feds will cut rates in September.
Don't get all excited, this is a minor correction to an otherwise stupid market.
As someone said anyone with a pulse has been able to get financing and the people that either shouldn't have been able to buy or shouldn't have been able to buy with 100% financing or stated income, or bought condos/townhomes are the ones that are mostly defaulting now.
Stated income loans should be, and have until just a few years ago, been for people who are self employed or have an income that is otherwise different from the tax return. BUT a few years ago "they" decided, in their infinite wisdom, to allow salaried people to go stated as well. So a ditch digger could claim a $10,000 a month income to buy any house he wanted. Unfortunately he couldn't make the payments.
100% loans have been, and will be again, for people who have shown a willingness and an ability to pay. In other words not your first time homebuyer.
Traditionally condos and townhomes have a much more limited market than do single family homes AND the ability to resell your unit is dependent upon factors outside your control. If your HOA doesn't have reserves or has had large special assessments OR if you have too many investment properties in the project then people may not be able to get financing which means you can't sell.
The slow sales in the beginning of the year were, to a great degree, weather related. We've had some sucky weather and people just don't get out to buy and/or the builders simply cannot build in those circumstances. Here in Texas we have had the wettest year in recorded history. By the first of July we'd already had more rain than in a normal year.
What we are seeing in the financing market is a tightening of credit guidelines back to more reasonable guidelines. Look for this to stabilize in the next month or so.
Not everyone should be able to get every type of loan. Some loans don't make sense for some people's situations.
Wall street is betting the Feds will cut rates in September.
Don't get all excited, this is a minor correction to an otherwise stupid market.
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the housing bubble was built on low interest rates and unreasonable lending practices. Low interest rates decrease the cost of money, and drive up prices. Irresponsible lending increases the number of people with money to spend, i.e. demand, further driving up pricing. The combination is an unsustainable market. As soon as rates rise, which is inevitable, the market adjusts with falling prices and an increase in defaults. The compounding factor is the developers that try to cash in before rates rise again. As soon as one or two developments reap huge profits, it seems everyone jumps in with increasingly ambitious projects. The result is a surplus in housing, inceasing defaults, rising rates, and tons of screaming.
The cost of getting into a house is the money you actually pay, not the selling price. Many people have been confusing sale price with cost. Sure, they paid X dollars for their home, but at an extremely low interest rate. When interest rates rise, the size of the market that can afford their home for the sale price will dwindle, but if one considers the dollars actually spent over the course of the financed period, the actual cost of the home hasn't changed much. Well, unless they were foolish enough to get an adjustable rate mortage and failed to refinance at a fixed rate.
The idea that $300,000, for example, is the same amount of money regardless of interest rates is a fallacy. $300,000 at 8% is more money than $300,000 borrowed at 4%. So if you bought your house for $300,000 with a 4% loan, you shouldn't be upset if the most you can get 5 years later is $280K when the buyer is financing at a much higher rate. Of course, people being people, they will, and they aren't entirely unreasonable. As I understand it (imperfectly, and as a first-time home owner), any profits gained from the sale of your home can be funneled into the purchase of your next home, and you can then defer the taxes on such. So a decrease in the sale price can impact your ability to accrue equity over your lifetime. However, during your lifetime, there will be periods of higher and lower interest rates. You are better off buying during low rates and waiting until rates are low again before moving into a new house. If you buy during a high rate, you will reap big rewards when rates drop again. So if you got into your current place with a low rate, but for some reason are forced to sell during a period of higher rates, you will come out ahead if you buy before rates fall, then sell again during the next period of low rates. You will most likely recoup any losses you might take, and then some, by selling during high rates.
If you want to invest in real estate to make money, buy when rates are high and sell when rates are low and sale prices skyrocket because of cheap money. The Federal Reserve maintains records on interest rates over the years, so it is easy to determine the "natural," or median rate and use that as an indicator for high/low. You won't have any trouble unloading your property during periods of low rates, and have a stronger position as a buyer during high rates. You just have to be sure you aren't paying more in financing than you can recoup in the sale price. Which is why it's called "speculation"
The cost of getting into a house is the money you actually pay, not the selling price. Many people have been confusing sale price with cost. Sure, they paid X dollars for their home, but at an extremely low interest rate. When interest rates rise, the size of the market that can afford their home for the sale price will dwindle, but if one considers the dollars actually spent over the course of the financed period, the actual cost of the home hasn't changed much. Well, unless they were foolish enough to get an adjustable rate mortage and failed to refinance at a fixed rate.
The idea that $300,000, for example, is the same amount of money regardless of interest rates is a fallacy. $300,000 at 8% is more money than $300,000 borrowed at 4%. So if you bought your house for $300,000 with a 4% loan, you shouldn't be upset if the most you can get 5 years later is $280K when the buyer is financing at a much higher rate. Of course, people being people, they will, and they aren't entirely unreasonable. As I understand it (imperfectly, and as a first-time home owner), any profits gained from the sale of your home can be funneled into the purchase of your next home, and you can then defer the taxes on such. So a decrease in the sale price can impact your ability to accrue equity over your lifetime. However, during your lifetime, there will be periods of higher and lower interest rates. You are better off buying during low rates and waiting until rates are low again before moving into a new house. If you buy during a high rate, you will reap big rewards when rates drop again. So if you got into your current place with a low rate, but for some reason are forced to sell during a period of higher rates, you will come out ahead if you buy before rates fall, then sell again during the next period of low rates. You will most likely recoup any losses you might take, and then some, by selling during high rates.
If you want to invest in real estate to make money, buy when rates are high and sell when rates are low and sale prices skyrocket because of cheap money. The Federal Reserve maintains records on interest rates over the years, so it is easy to determine the "natural," or median rate and use that as an indicator for high/low. You won't have any trouble unloading your property during periods of low rates, and have a stronger position as a buyer during high rates. You just have to be sure you aren't paying more in financing than you can recoup in the sale price. Which is why it's called "speculation"