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Replies (22)
- Monique Carrabba
- Contributions:747
Hey Kool-Aide Drinker,
You have to look at it from this stand-point. When I purchased my first home in 1998 with 8 plus percent interest and PMI (now down) my payment for $215k was 2019 a month plus tax and insurance. If you intend on borrowing funds for your purchase than 2010 will be a good mix of low rates and low prices. Prices could go down but the medium price in LA COUNTY went up last month. You never know when the right time will be to find the balance but to answer your question: I don't know but indicatiors see a flat market for the most part. If rates jump then we will all be out of the buying game.
Monique Carrabba
The Carrabba Group
Keller Williams Hollywood Hillls
DR#01708376
You have to look at it from this stand-point. When I purchased my first home in 1998 with 8 plus percent interest and PMI (now down) my payment for $215k was 2019 a month plus tax and insurance. If you intend on borrowing funds for your purchase than 2010 will be a good mix of low rates and low prices. Prices could go down but the medium price in LA COUNTY went up last month. You never know when the right time will be to find the balance but to answer your question: I don't know but indicatiors see a flat market for the most part. If rates jump then we will all be out of the buying game.
Monique Carrabba
The Carrabba Group
Keller Williams Hollywood Hillls
DR#01708376
- dacolan
- Contributions:1073
Yes, km9, we are still on track to see another record # of foreclosures hit the market, particularly here in CA.
From a Deutsche Bank report:
Looming foreclosure wave will derail recession recovery in CA
California is also home to the largest share of very risky loans called Payment Option Arms, which the data show are not faring well.
...
The state is in a "spiral of bad news," CRL says, that has no upside.
Unemployment-driven defaults are putting further downward pressure on the housing prices
From a Deutsche Bank report:
Looming foreclosure wave will derail recession recovery in CA
California is also home to the largest share of very risky loans called Payment Option Arms, which the data show are not faring well.
...
The state is in a "spiral of bad news," CRL says, that has no upside.
Unemployment-driven defaults are putting further downward pressure on the housing prices
- dacolan
- Contributions:1073
If rates jump then we will all be out of the buying game.
If housing values are based on affordability tied to income, in all likelihood higher rates will put additional downward pressure on housing prices.
As Roberto Ribas so succinctly put it, "If higher rates were caused by an increasing economy leading to inflation... higher rates wouldn't cause home prices to drop. BUT higher rates in an economy with stagnant wages and job losses, and you can bet it will contribute to prices dropping."
You're far better off paying less for a house with the potential ability to refinance after rates have risen, than to buy into an artificially manipulated market based on the misconception that one should take advantage of these low rates, only to see the value of your house fall once rates begin to rise again with no ability to refinance.
If housing values are based on affordability tied to income, in all likelihood higher rates will put additional downward pressure on housing prices.
As Roberto Ribas so succinctly put it, "If higher rates were caused by an increasing economy leading to inflation... higher rates wouldn't cause home prices to drop. BUT higher rates in an economy with stagnant wages and job losses, and you can bet it will contribute to prices dropping."
You're far better off paying less for a house with the potential ability to refinance after rates have risen, than to buy into an artificially manipulated market based on the misconception that one should take advantage of these low rates, only to see the value of your house fall once rates begin to rise again with no ability to refinance.
- klarek the realist
- Contributions:7044
" I don't know but indicatiors see a flat market for the most part. If rates jump then we will all be out of the buying game."
Monique, think about that statement for a second. If rates go up and affordability decreases, that will decrease the values of houses, hence the prices will drop. Rates jump from 5 to 8 percent, then I can buy 25% less of a house. Everybody will be capped that 25%. Hence values will drop that much as well. How does that equate to "prices staying flat"?
This is why agents shouldn't talk about the market. They don't understand basic economic or financial principles.
Monique, think about that statement for a second. If rates go up and affordability decreases, that will decrease the values of houses, hence the prices will drop. Rates jump from 5 to 8 percent, then I can buy 25% less of a house. Everybody will be capped that 25%. Hence values will drop that much as well. How does that equate to "prices staying flat"?
This is why agents shouldn't talk about the market. They don't understand basic economic or financial principles.
- falsedawn
- Contributions:98
I don't think this administration is going to let rates go much higher while there are no signs of a real economic recovery.
They have already demonstrated their resolve in propping up the housing market. Like it or not, that is their policy and it's not going away anytime soon.
My prediction is for rates and house prices to stay pretty much flat over the next year or 2, followed by a slow increase of inflation/rates as the economy slowly recovers.
As houses are an effective hedge against inflation, I don't see slowly increasing rates affecting prices much.
The "flood" of foreclosures may never materialize, and if it does, I think the effects will be localized to a large extent.
They have already demonstrated their resolve in propping up the housing market. Like it or not, that is their policy and it's not going away anytime soon.
My prediction is for rates and house prices to stay pretty much flat over the next year or 2, followed by a slow increase of inflation/rates as the economy slowly recovers.
As houses are an effective hedge against inflation, I don't see slowly increasing rates affecting prices much.
The "flood" of foreclosures may never materialize, and if it does, I think the effects will be localized to a large extent.
- Katie Curnutte, "Katie_C"
- Contributions:42
Also interesting to look at what's happening in individual price tiers. If you're looking for a foreclosure in the higher end of prices in your area, you may have an easier time these days. Our chief economist blogged about foreclosures moving up-market a few weeks ago. Top one-third of homes (in terms of value) are now making up almost one-third of foreclosures -- a huge change.
- dacolan
- Contributions:1073
I don't think this administration is going to let rates go much higher while there are no signs of a real economic recovery.
They have already demonstrated their resolve in propping up the hosing market. Like it or not, that is their policy and it's not going away anytime soon.
The Federal Reserve has already announced their plans to stop purchasing mortgage backed securities toward the end of Q1 2010. That alone will trigger rising mortgage rates. The only question is how far and how quickly they rise.
The "flood" of foreclosures may never materialize, and if it does, I think the effects will be localized to a large extent.
I agree the Option ARM problems will be localized to the bubble states that abused these loans the most, and I have no idea how long banks will be able to hold this inventory off the market, but the truth is interest rates will have very little impact on these loans in particular.
Most of these mortgage holders elected to make the minimum payment each month, which wasn't even enough to cover the interest. When these loans reset, even if they realize a lower interest rate, the difference in payments once the additional interest and principal is added will be more than enough to see these loans begin to default en masse.
They have already demonstrated their resolve in propping up the hosing market. Like it or not, that is their policy and it's not going away anytime soon.
The Federal Reserve has already announced their plans to stop purchasing mortgage backed securities toward the end of Q1 2010. That alone will trigger rising mortgage rates. The only question is how far and how quickly they rise.
The "flood" of foreclosures may never materialize, and if it does, I think the effects will be localized to a large extent.
I agree the Option ARM problems will be localized to the bubble states that abused these loans the most, and I have no idea how long banks will be able to hold this inventory off the market, but the truth is interest rates will have very little impact on these loans in particular.
Most of these mortgage holders elected to make the minimum payment each month, which wasn't even enough to cover the interest. When these loans reset, even if they realize a lower interest rate, the difference in payments once the additional interest and principal is added will be more than enough to see these loans begin to default en masse.
- Terri Linnell, "DebtsNMesses"
- Contributions:6728
I agree about the rates. Can you imagine the panic if rates went to 7%? 9%? 11%? Realize the boom of the late 80's was caused by the low 9% interest rate! Yet, if we saw 9% now, it would hit headlines as a bust! lol
My advice would be to make your plans, and be willing to do them early if rates rise too much. There IS a point in time when loans are hard to get, because the banks DO NOT have the money to loan. This DID happen in the 60's. My dad bought his house after shopping MANY banks. There was ONLY ONE bank in all of Cleveland still able to loan money.
When rates rise, prices lower and this market is sooooo unstable.
--Although if you are buying cash, wait until rates hit 18%. lol Prices will be very low then.
My advice would be to make your plans, and be willing to do them early if rates rise too much. There IS a point in time when loans are hard to get, because the banks DO NOT have the money to loan. This DID happen in the 60's. My dad bought his house after shopping MANY banks. There was ONLY ONE bank in all of Cleveland still able to loan money.
When rates rise, prices lower and this market is sooooo unstable.
--Although if you are buying cash, wait until rates hit 18%. lol Prices will be very low then.
- NTETS, "Mr Caveat"
- Contributions:6436
dont squeeze the trigger until you see the whites of their eyes! seriously, missing the bottom isnt even worth worrying about. jumping in too early on the other hand? no no no...
- Showcase Twins
- Contributions:69
- John Sefton, "Your Realtor John"
- Contributions:106
The success rate of short sales has increased dramatically this year. That, combined with more loan modifications, may reduce the number of foreclosures expected in the future.
- Todd Schneider, "Todd Schneider"
- Contributions:5
Yes we are still on track to see a lot of foreclosures. The big question seems to be when? I went to a meeting with a number of the largest banks and their foreclosure representatives a month ago. We asked them when we could expect to see a large number of foreclosures to hit the market. The answers were mixed. They said that the government is making them hold on to them until after the elections in November are over. After that we could start to see some forclosures hit the market. They also said it could be another year or two before we start to see a large number of these foreclosures. The main thing right now is that there is no definitive answer. The prices are low, and the rates are at all time lows. You can't really go wrong buying a house this year.
- dacolan
- Contributions:1073
Yes we are still on track to see a lot of foreclosures. ... You can't really go wrong buying a house this year.
What happens to house prices when inventory skyrockets (many of which are unoccupied foreclosures) and these record low interest rates are once again dictated by a free market rather than manipulated by gov't intervention?
What happens to house prices when inventory skyrockets (many of which are unoccupied foreclosures) and these record low interest rates are once again dictated by a free market rather than manipulated by gov't intervention?
- dacolan
- Contributions:1073
The WSJ's MarketWatch.com takes an updated look at the shadow inventory problem here: Housing isn't close to stabilizing
Adding all of these together, we come up with a total of roughly 6.97 million residences that are almost certainly going to be thrown onto the resale market as distressed properties at some point in the not-too-distant future. This massive number of homes will put enormous downward pressure on sale prices. To believe that prices are firming now is to completely ignore this shadow inventory. Ignore it at your own risk.
Adding all of these together, we come up with a total of roughly 6.97 million residences that are almost certainly going to be thrown onto the resale market as distressed properties at some point in the not-too-distant future. This massive number of homes will put enormous downward pressure on sale prices. To believe that prices are firming now is to completely ignore this shadow inventory. Ignore it at your own risk.
- Judy Graff, "Judy Graff"
- Contributions:119
Just a word about the "shadow inventory" we've all heard so much about. I get around in the San Fernando Valley and cover a lot of territory. And I'm just not seeing that many vacant houses, even in economically depressed neighborhoods. Yes, I know -- my view may be very limited. But it seems that we'd start to see the vacancies and blight much more than we are.
- dacolan
- Contributions:1073
There are many RE pros that take the position that shadow inventory is simply a conspiracy theory. The fact is defaults and foreclosures are a matter of public record. The raw numbers speak for themselves. Many of these distressed homes aren't vacant. They have mortgage holders (or renters) living there that haven't paid their mortgage for months, if not years. The time it takes from default to the bank actually taking possession has been growing steadily for the past couple of years. Just because the yard is being maintained doesn't mean the mortgage is current.
- Judy Graff, "Judy Graff"
- Contributions:119
Dacolan, you're absolutely right. I'm just saying... And it perplexes me.
- dacolan
- Contributions:1073
- uncle dodad
- Contributions:2
This shadow inventory is there because this shadow government fed reserve ie will not allow millions to be turned out into the streets on Obama's watch thats why your perplexed ; it reminds me of a time when I won a monoply game and I had the other person mortage all there properties too me but they wouldn't concede the loss. The person simply removed themself from the table and came up with some rule I'd never heard off claiming I did not win. This isn't a make believe game out here although the rules don't seem to be applied to everyone equally. I think the reality is too many people living out of there cars with no jobs is too much like a real depression. I'm in ministry so I see and talk to a lot of people who live on the street and the majority of them that I have met never owned a home they simply couldn't afford rent and were booted out into the street while someone who walked away from a house simply rented a house. No easy answers here but if 1+1 doesnt =2 then you better find if the rule makers are playing with real numbers.....
- uncle dodad
- Contributions:2
Uncle do dad you are presidential material... well at least this administration .All hail too common sense Wake up America lets get this wrong back on the right track!!!!
- Alexandr Gritsenko, "alexgritsenko"
- Contributions:31
.For veterans we have programm 0% down payment.Property located close to Studio City
- SteadyState
- Contributions:783
Increasing Foreclosures
Not only are foreclosures rising (see Mercury News article from 2/16/2011).
Reduced Local Spending
But many cities in CA find themselves scrambling to cut spending. (For example, San Jose, CA has roughly a $110M deficit and this year alone they are planning to layoff ~345 police officers and ~145 firefighters.)
Reduced Sate Spending yet to Come
The State cuts to education and social have not yet arrived so you can extrapolate what a $25B deficit will do.
This will put further downward pressure on homes for the next two years at least. Just in time for the Government waning itself from tax-payer guaranteed mortgage loans and in time for elimination of the mortgage deduction tax-break programs whose time has come.
Not only are foreclosures rising (see Mercury News article from 2/16/2011).
Reduced Local Spending
But many cities in CA find themselves scrambling to cut spending. (For example, San Jose, CA has roughly a $110M deficit and this year alone they are planning to layoff ~345 police officers and ~145 firefighters.)
Reduced Sate Spending yet to Come
The State cuts to education and social have not yet arrived so you can extrapolate what a $25B deficit will do.
This will put further downward pressure on homes for the next two years at least. Just in time for the Government waning itself from tax-payer guaranteed mortgage loans and in time for elimination of the mortgage deduction tax-break programs whose time has come.
2010, 2011 foreclosure predictions: are they still on track?
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