27-30% of mortgages are under water

It's a good time for people looking to buy their first home!

Good but not great time to buy.

The process of buying a home going for a short sale is a bit painful and long.

You have to deal with the seller and their bank.

If you don't want to go through that you have 1/3 less options.

Buying a foreclosed home is not much fun either.

But to stay positive, home prices going down means they are more affordable and you can buy furniture after buying a house.

You can get a mighty good deal without doing a foreclosure or short sale. I bought my first house this past year. The previous owners had lived in it for about 3 years, had purchased the home for $275K, had put $40K into it (finished the basement, put on new roof and new retaining wall), and we bought it for $245K. Wasn't a short sale or a foreclosure. And we get the $8K tax credit this year.

Sounds like it was a pretty great time to buy to me.

Good for you!

The previous owner lost $30K.

Bad for them.

Still, these choices are fewer and fewer and the $8K incentive is gone.

mylifeismovingjustfine wrote:

Sounds like it was a pretty great time to buy to me.

In five years, come back here and let us know what it's worth.

mcgato wrote:

In five years, come back here and let us know what it's worth.[/quote]

Do you really think that the house will be worth less five years from now? That would be one terrible economy.

I agree with mcgato.

Post back in 5 years and let us know. If you break even with renting, good for you.

mylifeismovingjustfine wrote:

You can get a mighty good deal without doing a foreclosure or short sale. I bought my first house this past year. The previous owners had lived in it for about 3 years, had purchased the home for $275K, had put $40K into it (finished the basement, put on new roof and new retaining wall), and we bought it for $245K. Wasn't a short sale or a foreclosure. And we get the $8K tax credit this year.

Sounds like it was a pretty great time to buy to me.

I don't know where you live, but in Florida if you told me those numbers, I would say that you paid way too much. What they put into a house is usually mostly irrelevant--because the costs don't translate nearly into dollar for dollar increase in value of the house. Value is determined by sold comps in the neighborhood, generally condition only has a small effect up or down on value. So basically you bought a house that sold for 275 last year for 245 this year. WAY too high, IMHO.

not in Florida wrote:

I don't know where you live, but in Florida if you told me those numbers, I would say that you paid way too much. What they put into a house is usually mostly irrelevant--because the costs don't translate nearly into dollar for dollar increase in value of the house. Value is determined by sold comps in the neighborhood, generally condition only has a small effect up or down on value. So basically you bought a house that sold for 275 last year for 245 this year. WAY too high, IMHO.

Any house that has dropped 30K in value in the last year is in a dead area. Get out now.

Some think the average home value could be less 5 years from now than it is today.

It is certainly less now than it was 5 years ago.

It would not necessarilty depend on the economy.

If mortgage rates go up (and they are very low now) that could cause prices to go down.

If higher down payments are required, values would go down because less people could borrow.

All of the foreclosures get processed, putting more homes on the market would bring values down.

Outside of an economic boom or special programs there does not seem to be many forces in play that would push values up.

If you got a good deal in a good location your house may go up.

here is a respectable blog about the housing crash and its currently dim prospects:

http://patrick.net/housing/market.html

I've been following this blog since 2007. I wish I had started reading it in '05 before I bought my condo which I later had to short sell.

X-Runner wrote:

Outside of an economic boom or special programs there does not seem to be many forces in play that would push values up.

Whatever. Flagpole says manufacturing is BOOMING. The housing rebound is on its way.

gayguysarecooltoo wrote:

Do you really think that the house will be worth less five years from now?

I think that it is more than likely. Cute graph here looking at the Japanese housing bubble and public sentiment along the way.

True story from 2005. I am in a golf league at work, and a guy I am playing against is also from my home town of Hoboken, NJ. We were complaining about the high housing prices in town. I said that I saw no reason to buy, because housing prices would not be higher in five years time, and most likely quite a bit lower. I had been reading a housing bubble blog for a while at that point. It is here:

It is all relative to where you are buying/bought. I bought my first house about 3 years ago for $610k. It had been on the market for about a week and we loved it so we grabbed it as quickly as we could. I could probably sell it today for about $650 but you never know. It wasn't the only option on the street at the time, but it was the most affordable for us. Our street is in high demand; we had a house sell for $1.2 just the other week. Nothing is for sale right now, and if I were to put it up I bet it would sell pretty quickly. It is tempting b/c we don't need such an expensive house; I would love to have a lower mortgage payment. I guess my point is that some parts of the country aren't being killed by the market.

Well, manufacturing is EXPANDING...I don't know about BOOMING. It has been expanding for 17 months now which is good. The Dow was at 6400 in March 2009 and is now over 12,000 just less than 2 years later. The unemployment rate just dropped from 9.8% to 9.4% (and is down from its high of 10.1%), and while the doubters will say that many job seekers have just "given up", I say that's BS. Many of them have simply used all of their severance pay and unemployment pay and are now retiring; lots of people of retiring age now. MANY of those are very GLAD that at the very end of their careers that they got a severance package and then unemployment.So, will the housing market (the PRICE of houses) rebound quickly? I think not and hope not. First-time buyers are getting a STEAL right now, and the money they save will be spent on consumer goods, thus helping the economy. The main reason for the housing BOOM was that banks (encouraged by the government; starting with Clinton) were giving crazy loans to everyone and their brother...people who didn't deserve the loans.Housing is just one portion of the market. Manufacturing is up. The stock market is up. Hiring has begun (and was quelled a bit by the horrible winter we've had, so expect to see more hiring as spring arrives). Personal saving is up and so is spending.Many of the people who did a short sale or foreclosure did NOT need to do that. Some did it because they got nervous that their home value was less than what they owed. Big deal. If your income is the same or more and you didn't get an ARM or some stupid sub-prime loan, and you could afford the payment when you took out the loan, then you should be able to afford it now. If your house went down, then so did all the others in your area (and many other areas). If you sell yours for 50% less than you could have 3 years ago, then you can also buy one for 30% less than you could have 3 years ago. If you are selling because you are going into a nursing home, then you've lost a bit, but hopefully you had other investments and long term care insurance in place too.

boom times wrote:

X-Runner wrote:

Outside of an economic boom or special programs there does not seem to be many forces in play that would push values up.

Whatever. Flagpole says manufacturing is BOOMING. The housing rebound is on its way.

Flagpole, are you really painting a rosy picture of this housing slump?

Some people are really getting screwed because they are currently under water and want to sell or upgrade to a nicer home. How do they sell without paying big time cash at closing, and what can they use as a down payment on the new home?

Home prices have to come down again. They should have fallen much lower when the bubble burst, but Bernanke managed to partially re-inflate the bubble. I suspect home prices will fall another 20-30% before they hit bottom.

where wallace at? wrote:

Some people are really getting screwed because ...

Most of those people screwed themselves by making a horrible financial decision in a bubble market. Let's see, they probably paid way more than the place is worth (a good metric to check is purchase to rent ratio), put very little down, probably got some goofy loan with lower or no interest for a few years, and possibly paid more than they could ever realistically afford.

where wallace at? wrote:

Flagpole, are you really painting a rosy picture of this housing slump?

Some people are really getting screwed because they are currently under water and want to sell or upgrade to a nicer home. How do they sell without paying big time cash at closing, and what can they use as a down payment on the new home?

Want to schmant to. IF they put 10% down or more on their home, and IF they planned to be in it for 15 years at least before selling as they should have (meaning they've been in it for 15 years or more), and IF they had a fixed rate mortgage, then they can likely sell it and upgrade if they want. If they can't upgrade, then I don't really shed a tear for them. If their upgrading is so tied to the value of their home, then perhaps they don't need to be upgrading anyway.

Now, I do understand that some people are in a tough situation with a divorce or health issues or a job loss that they can't replace, etc. I feel bad for those people. MOST of those who feel they are in a bad spot just because they are underwater though, aren't really in a bad spot. They can still make the payment, stay in it long enough to see some price rebound, and then sell later on. Perhaps their $200,000 home won't eventually be worth $500,000 as they had planned, but people need to quit thinking of their homes as investments and just think of them as places to live.