Is that house leaning over about to topple? Or does somebody need to learn how to keep the camera level?
I can't understand it. My grandparents have a much nicer and larger house in Queens 10 minute walk from the subway. It sells for less than that.
True, but it proves the point either way. Either the real estate values are way too high. Or people have unrealistic expectations. It's amazing. A house like that in Phoenix, where I live, would probably sell for $150K if it is in a nice neighborhood. Then it would be torn down, a new house would be built and sold for $600K.
A buddy of mine bought a house in PHX- Fountain Hills in 95 around 130K with Saguaros in his garden and a great pool, It was a huge house. He sold it in 1999 and moved to Alexandria,VA. I wonder what that house is selling for now.. I assume it should be at least 550-600K..
You hit the nail on the head. The SoCal market has always depended on new people coming it to buy out existing owners so they could move up. For this to work you need single family detached housing in the 300-400k range. You also needed houses in the 600 to 1000k range with significant advantages to the house you lived in so that people would see a advantage in ultitily in selling and moving up. We have neither now. Single family housing in nice areas are in the low 800 and houses in the low 800's are no bigger or better then houses that sold for 500k 5 years ago. In a nutshell, there is no entry level affortablity to gain equity to allow purchases of move up's and the move up houses are not better then the entry level of several years ago. It is kind of like options expiration days where all bullish calls expire worthless. John
High cost of a low-payment loan By Kenneth R. Harney Special to The Times January 16, 2005 WASHINGTON ââ¬â Are low monthly payments on a home mortgage always good? Are you kidding? Of course they are, you might answer. But a report issued by a Wall Street firm suggests that some low-payment loans in today's hot market could cause problems for borrowers who don't really understand the risks they entail. The report is from Dominion Bond Rating Service, a company that evaluates the risk characteristics of mortgage securities purchased by deep-pocket investors. Those bond investors now provide most of the funds lent to U.S. home buyers, and they view defaults and foreclosures as dread diseases to be avoided. The study focused investors' attention on two widely used loan features that reduce buyers' monthly payments or let them fudge their incomes: interest-only loans and no-documentation "stated-income" mortgages. "Some of the new mortgages we see are very scary," said Susan Kulakowski, a Dominion vice president and co-author of the report. "They allow people to qualify solely on the basis of a low initial payment" rather than on what they can truly afford. Then the mortgages turn into money-gobbling monsters that can push consumers into payment shock, default and foreclosure almost overnight. Kulakowski is especially concerned about the short-term "hybrid" interest-only loans now flooding the market to help consumers with marginal credit or income buy houses. Interest-only mortgages require no pay-down of principal for a set time at a low fixed-interest rate. Payments during that period typically are set well below what a borrower would pay on a conventional, 30-year fixed-rate loan. At the end of the initial period, which may be as short as two or three years, the loans convert to fully amortizing adjustable-rate mortgages at prevailing market rates. Principal reduction now kicks in, but because of the compression of the payback period ââ¬â 25 to 28 years ââ¬â and the addition of principal to the payment mix, the total costs can balloon 50% to 70%. Marginally qualified home buyers jolted with such payment increases within 24 to 36 months of their purchase "are very likely" to be pushed beyond their ability to pay the loan, Kulakowski said. Their only option may be to refinance, but since they may still not be able to afford market-rate payments, they could be stuck over their heads in house debt. As an example, Dominion's report tracked a popular "3/1" interest-only hybrid ââ¬â closed in September ââ¬â through a projected payment scenario over the next 10 years. The original loan was for $350,000, at a 4% payment rate for the initial 36 months. (The "3/1" designation refers to the initial three-year period of fixed payments on interest only, followed by conversion to a market-rate adjustable whose rate changes once a year for the remaining 27-year term.) The buyers' initial-period payment, which they used to qualify to purchase the house on their then-current income, came to just $1,167 a month. That is $773 a month less than they would have to pay on a competing, 30-year fixed-rate mortgage of $350,000 at September's lowest-available 5.28% rate. What happens after the 36th month? The payment rockets to $2,184 ââ¬â an overnight increase of $917 that would put a severe strain on most new homeowners' budgets. In a faster-rising rate environment, the shock would be even worse. By year 10, according to Dominion's projections, the owners would be paying close to $2,700 a month. Kulakowski is concerned about other default-prone mortgage products too. Potentially worst of all are "stated-income" loans made to borrowers with marginal credit scores. Stated-income or no-documentation loans allow borrowers to dispense with the usual proof of income ââ¬â W-2s from their employers, for instance ââ¬â and proof of assets such as bank deposits. Dominion says no-documentation mortgages "were originally intended for self-employed borrowers" who owned businesses or had substantial income or assets they did not wish to list as part of a loan application. Recently, however, the concept "has been expanded to include salaried borrowers who cannot or will not show proof of income." Why don't people with W-2 documented salaries want to show them? Many are buying houses with prices they can't afford. And if the economy falters or their incomes drop, they will be the first into foreclosure.