Front page of usa today paper today. "Homeowners stuck as lenders cinch standards" As expected.... The door is being slammed shut on creative loans which helped create the housing bubbles in many part of the country.... "But the sudden shift in lending rules could also threaten the homeownership gains made by families since 2000, weaken the recovery of the housing market and potentially slow the economy." "...Because the interest rates on these loans are usually fixed for the first two or three years, and then start rising, "The worst is still to come," says Brenda White, a managing director at Deloitte & Touche...." ...The Center for Responsible Lending projects that 2.2 million homeowners with subprime loans will lose their homes...." http://www.usatoday.com/money/economy/housing/2007-03-04-mortgages-1a-usat_N.htm
Two things here; just because USA today pans their opinion does not make it so, and subprime loans with arm's are not the majority of mortgages by a long shot, imo. Still plenty of fixed rate below 6% prime mortgages out there with healthy equity. I think a majority of those subprimes were done toward the end of the boom, but the primes were more likely done before the fed began hiking rates again or shortly after. Many people were waiting for rock bottom fixed rate loans before doing a refi. With the threat of mortgage rates going higher I would think that people in those arm's would be seeking a refi long before their fixed period is up. Iirc the refi applications were up in January. I agree it's definitely something to keep an eye on, but I'm not convinced that 6 years of home appreciation are going to be wiped out though, I'm not seeing that in transaction prices here in Pinellas county, which has been hit pretty hard in this housing slump, just not that hard. Homeowners are basicly seeing their astronomical increases trimmed back to more reasonable levels, in my area, of course ymmv.
Real estate is local, and in san diego over 85% of the loans were interest only arms :eek: This was not recent either, this was a few years ago. The usa today article simply repeated what a lot of other articles also said, and things I have said in the past. Sounds like you are poisoning the well, if you see a problem with stuff in the article then point it out, its not automatically false just because its in USA today as you imply. Most of that article seemed very reasonable. Especially the part about people getting stuck in a loan, because they cant refinance because values went down and things became more strict.
Not sure what you mean by poisoning the well. I did not imply that it is automatically false because it's in USA Today, only that it it's not automatically correct, there is a difference. I stated what I thought was wrong with the article in the rest of my post, and ended with ymmv. You have your opinion and I have mine, no need to take offense because I don't agree with you. Your figure on the arms in San Diego would be quite alarming if it were common nationwide, do you have a source on those numbers that you could share?, it would be quite interesting to read and might change my view if I can use it to find similar information on other key US cities.
live in san diego too.. and agree it has quite a bit to come down. but do the math. 1 trillion in ARM resets in 07. Not all of those are subprime. But lets say they are, just to give your argument an edge... lets say 20% of those people are unable to refi and foreclose. Thats 200 billion of home equity. Lets say banks have to liquidate this home equity at a 25% discount from peak prices (and I'll throw you another bone or two, and assume ALL defaults bought at the top, and put no equity down). Thats a net 50 billion loss for lenders, bond holders, etc.. Not to mention, these 'bankrupt' consumers are already squeezed, and probably have already contributed their reduced spending to negate overall economic #s. bottom line: 50 billion dollar net loss absorbed amongst all of these parties, (including credit default swaps that i assume were available to heavy holders of subprime mortgagebacks) is no big deal in the big picture. Amgen lost 15 billion in market cap in a few past weeks, didn't it? TXU bought for 30-40 bil cash? right? etc. etc. corporate buybacks in the many billions annually. Overblown. That said, sure house prices have more to correct, yada yada yada. I'm in no disagreement.
if you doubt the housing weakness..try and sell your home...I did and I realize my assessment will draw no bid...If I had to move I would be worried because I don't think I could sell my home for as much as i thought i could 6 months ago.
don't doubt price weakness. but did you price it 25% under 'market'? I assume you would've had a bid in that case.
Well that's a no - brainer, anyone that thinks they can sell today for the appraised value 6 months or more ago is kidding themselves. I don't think anyone has posted that values have not dropped (although I have not read every post in this thread). I was only disagreeing with the statement that 6 years of equity appreciation have been wiped out in the Florida market.
I keep watching Zillow in san diego, and it lags, but I keep seeing homes selling 20% below the zillow estimate. Well below the low range given by zillow. I saw one guy the other day trying to sell his home for 100K ***ABOVE*** the zillow estimate. I about laughed to death. Some people are still holding on to their 20% a year return fantasies. We wont see that again for decades here.
I think this scenario has been played out before. The late 80s brought us Wall Street insider trading scandals followed by a crash followed by a dip in liquidity, then a big drop in the real estate market which eventually moved up in tandem with the stock market. Some of those conditions have not been met yet, but it is looking very familiar about now. In various markets, there are unique factors that may impact real estate more severely than the components that contributed to that the prior cycle. In low-income and a portion of middle-class households, many are already overextended, any drop in the market or the overall economy will only increase abandoned mortgages. There will be an increased inventory at reduced prices. Housing starts will fall. High-end residential real estate has been barely holding in some areas, pretty flat but for properties going south. If there is a major correction, that dog won't hunt. Overall, both residential and commercial real estate is always tied to the stock market. Any quaking and most people tend to stay where they are if they can. What concerns me most is that in this cycle, most people do not have the economic buffer that existed the last time out. More people are in debt and fewer people have savings. If things go the direction it looks like from here, it's going to be a steep road down and will take longer to recover.