This is what scares me: http://money.cnn.com/2007/03/19/news/economy/next_subprime/index.htm?source=yahoo_quote This isn't small frys playing...this is the big lenders getting bit in the ass in my opinion.
Those of you that point to cheap housing in other areas to justify that there is not a bubble are missing the point. If they havent increased in the past few years they never will and this is because they are percieved to be undesirable places to live. Even so ma,y of these places have gone up a lot due to the sheer wait of money coming off the banks lax lending standards. Without this money these houses would not have moved nearly as much. The supply:demand equation always determines price. Increase the demand via cheap money then for a given level of supply prices will move up- simple. But... and heres the tricky bit kids....... Decrease the demand via tightening lending standards /regulation/falling incomes/falling sentiment etc and you will get.... wait for it .........................................................................FALLING PRICES If you think this sort of fall will somehow be confined to subprime mortgage belt areas, think again. Every housing area has buyers that are speculators , these buyers typically gear up using finance even though they themselves may be high net wealth individuals and you might perceive them as "cash buyers". ie wealthy buyers will be squeezed, and perhaps more importantly these wealthy buyers are more likely to have other profits to offset any losses against and additionally are less emotionally attached to their speculative housing investment compared to their primary residence. Thus they are more likely to dump there investment once it becomes obvious that there is not the buyers coming from underneath to sell to at their price level. Next you have the true top end buyer, ie the high net wealth individual buying his primary residence. They are typically coming off huge bonuses or huge profits coming from their own business etc. This group have become supremely confident of their ability to make money, having done so consistently over the past decade of ever expanding credit. Therefore they pay up big time for their trophy house, ignoring past sales etc just so they can get access to such a prized possession. It is not uncommon for buyers to pay 20-30% more than comparitive past sales are worth. Often it seen as a status symbol to be known as the "guy who paid x$ for the smiths house" A level of infamy or bragging rights attracts some buyers in this class. they are at the pointy end of the boom as they make the headway for others to follow at the top end. The market as a whole needs all classes of buyers to truly boom and I have no doubt we have had a boom. The first 2 categories of buyers are directly affected by interest rates/ credit crunch, leaving the top end buyers to play in their own top end world without a mortgage. Seemingly immune to falls in the market because they all paid cash.....what a wonderful world (I think to myself) Except that these people all earn their huge incomes and bonuses from other people at the bottom of the pyramid all of whom are affected by the credit crunch/falling property market/reverse wealth effect. Suddenly the huge profits arent there and the bonuses dry up. There are no other buyers for their property making the same sort of income that they once did. Property prices fall from the once lofty "values" and any sales not only knock the speculative excess off ie the 20-30% but also the other 10% or so just to get the sale. Suddenly the top end has fallen 30-40%........ DOH!
Like something like this? http://www.weichert.com/search/real...yid=34383&ptypeid=32&minpr=700&maxpr=800&pg=4 for 800k? I'm looking in the Northern NJ area because I've been relocated. It's a fucking joke with all these old crappy houses for 800k. Bite me. I'll rent.
I just had to point out that your quoting of "We've only Just Begun" which was, indeed sung by Karen Carpenter is actually more appropriate to this discussion than you may realize as it was originally written for a Wells Fargo Bank TV ad. Karen's brother saw the ad on TV, couldn't get it out of his head, decided to turn it into a song which became a hit. So... here we are talking about Banks and foreclosures and the bank singing "We've only Just begun!"
And here's how John Q. Public is going to get wacked on the back end. My taxes are going up, how 'bout yours? http://timesunion.com/AspStories/st...tegory=FRONTPG&BCCode=HOME&newsdate=3/20/2007 Anxiety rises with assessed values Albany officials try to allay homeowners' fears about revaluation, taxes By TIM O'BRIEN, Staff writer Click byline for more stories by writer. First published: Tuesday, March 20, 2007 ALBANY -- Homeowners are undergoing sticker shock, stunned at the value the city is placing on their residences. Over the weekend, Douglas Bullock was among 30,500 Albany residential and commercial property owners who received notice of the estimated value of their real estate under a new reassessment. His single-family house in the Beverwyck neighborhood near Albany High School was valued at $65,000, but now is estimated at $120,700. "I am so mad," said Bullock, who is retired. "They doubled it. When the housing bubble hits and all the market values are about to go down, they double mine." Robert Pastel had a similar reaction to the new value of $226,000 placed on his home on Park Avenue. "They doubled mine," said Pastel, who lives near the Madison Theater. "I'm planning on challenging it." Letters sent to property owners also list the potential tax impact. For Bullock, his combined city, county and school tax bill could climb from $2,008 to $2,422, an increase of 21 percent. City Assessor Keith McDonald said the full-value assessments are based on sale prices. Rising values, he said, do not necessarily mean taxes will increase. "People were afraid their taxes would double," he said. "That's not going to happen." While the estimated tax impact is alarming some residents, McDonald said he could provide the estimate based on current tax rates, not on whatever the city, county or school district might change them to be to reflect the total valuation, which tentatively has grown from $3.1 billion to $5.1 billion. Mayor Jerry Jennings said his 2008 budget will take into account the higher property value in the city. "If their property value went up 40 percent, their taxes aren't going up 40 percent," he said. "I don't see us having to raise taxes substantially at all." He also wants to meet with school district officials to encourage them not to take advantage of the higher property values. Albany Schools Superintendent Eva Joseph issued the following statement. "Because the district is at an early stage of its budget discussions, it is not in a position to speculate on a specific tax rate. As always, we will look to balance our obligation to provide the best for students with our obligation to be fiscally responsible," Joseph said. Howard Stoller, the chair of the Council of Albany Neighborhood Associations, said the key is what happens next. "We don't think it should be used as a method for increasing people's taxes," he said. "It's nice to see your values go up so long as that doesn't happen to your tax bills." Assessments vary based on the sales prices of nearby homes, McDonald said. The city overlaid sales prices on a map and came up with 12 "value areas" based on where homes sold for a similar amount. "The average home in Arbor Hill is not the average home in West Hill is not the average home in Pine Hills," he said. "If you have a ranch, we're only going to use ranches in your value area." Homes located on different ends of the same city street can vary in value, he said, and the revised assessments reflect that. The reassessment comes a year after property values peaked locally, said Peter Staniels, president of Weichert Realtors Northeast Group. Area homes are not losing value, he said, but their worth is not growing as fast as it had been. For a seller, he said, a higher assessed value can be a plus. "The homeowner and the agent will use it as a justification for the price," he said. O'Brien can be reached at 454-5096 or by e-mail at tobrien@timesunion.com.