Housing markdown

By the tax system, could I not sell a house that I repo’ed from you to any of my golf course friends at a 90 percent discount and charge you the home-owner with owing me the difference or loss I took when I sold this house to my friend. So, I could hound the home-owner for the rest of his life for the 90 percent loss I took liquidating this property. Tell me if I’m wrong…golf course transactions.

i wish they would bring it down me and my mom are having hard time because my dad wont pay of his bills then we get a lean on the house and it makes life harder yet im only 12 so its not really any of my buisness. but still…

I really have to blame it on people’s greed. it’s greediness that allowed people to coerce a bunch of people into getting loans they couldn’t afford in the first place. but then again, why is it that housing is so expensive?
david jang

People losing their houses due to their own shortsightedness and immaturity? Sounds FANTASTIC to me.

Me and my fiance have spent the last 2 years trying to find an affordable and livable HOME (not investment, a place to make some kids and a lawn to mow.).

Because I’m not immature and shortsighted I got myself prequalified and never even looked at an ARM. This was before all the ARM problems started popping up, it just sounded way too stupid to take a loan that I someday would not be able to afford.

Now talk of a government bailout? Oh thats AWESOME, keep housing values up, take money from an entire generation of working class intelligent young americans to bailout our nations morons and babies. Then leave these young americans without ever having a chance to get a home of their own.
Liberals, KEEP GOVERNMENT OUT OF BUSINESS! Let the invisible hand do it’s work, and let the world favor intelligence for a change.

The worst isn’t even close to over. Look at some historical graphs of house prices. Factor in baby boomers retiring and selling as well as cashing out 401ks as well as a smaller generation that makes less money (yay, thanks outsourcing) trying to purchase houses and pay into social security and medicare. Oh yeah, don’t forget that the ARMs etc… have just started to really reset.

About 3-4 years ago, we started to see an oversupply of new construction with no new jobs. Two years ago, over 50% of all home purchases in Boulder county were made with adjustable rate mortgages. With 16 or 17 quarter-point rate hikes over the past 3-4 years, the “Tsunami” was rolling. New construction figured it out and has been pulling up their roots. The sleeper on this will be the timing of tightened lending requirements and underwriters FINAL say just days before loans close; especially on jumbo loans! The East, West,Florida coasts, and Arizona are going where we have been for the past 4 years. We are now priced closer to right and inventory is falling. The flight to Colorado has begun. We are starting to see a lot of people coming from out of state. All we need are a few key Companys to realize the same thing and bring a few more corporate headquarters with them. The Fed is going to have to get aggressive in cuts, to allow borrowers more time to refinance into safer fixed loans at lower rates. THAT is when recovery will really kick-in, if done with more stringent loan requirements, and NOT allowing false “refi appraisals” so that cars, toys, and other loans can be tied to a value in excess of the homes value. I also don’t beleive the latest Cost of Living indexes have fully indexed the price of fuel, and the trickledown effects on freight for EVERYTHING, ie milk, feed, parts, misc, and especially commuting , is not being given enough of the blame, as discretionary income stinks. The faster they can drop those rates, the quicker confidence can start to be restored. The Fed could actually save Christmas if they would be more aggressive, in a downward way.

Yes, I believe that we have not seen the worse and that we will and need a mass consolidation of the sectors in the real estate industry.

The true concern here (as in many metro areas) in la la land, the DC metro area is affordability.

We may have the best job market in the country but not a whole lot of folks are getting paid anymore.

This “bubble that is hissing” affects everything from recruitment of talent here in the Beltway, lengthier traffic patterns due to extended commutes and also the fact that a very significant percentage(43%) have been using non-prime and non conforming loans and they are waiting to lose their home.

The “bubble” will burst likely quite soon, lets say 8 months to 1 year.

One more interesting note is we have seen so many folks that have refied excessively and now are prime short sale materials. Even several of our real estate partners have literally been reassigned or layed off.

In a nutshell, a lot more pain is coming for a lot of folks.

Basically,if you cant afford it TODAY then don’t buy it TODAY!

I purchased a home and 2 acres of land in the Phoennix area almost 5 years ago before things went insane and I am so glad we did! I would love to see a 50% decline in the price of homes so others can afford to buy because right now, it is not a good market for the average person. People that bought to just turn a quick profit are getting what they deserve. Greed is a dangerous thing! and now they are all reaping what they sowed.

We have too many greedy and dishonest people working inthe Mortgage,RealEstate and Financial Industry. This problem was brought about by speculators, poor people being lied to by lenders and Real Estate folks alike. It is a man made problem that did not have to happen but some people became very rich.

I am saddened & frustrated at the same time by this mess.

One the one hand you have predatory lenders selling overpriced homes with unreasonable terms during the boom. And our regulators allowing all this insanity to go on. Thats sad.

But what frustrates me is… ultimately YOU signed the dotted line. You made the decision to buy something you KNEW you couldn’t afford! Now why should you expect someone to bail you out for being stupid? Just because alot of other people did the same thing? Do you think the Ferarri dealership should sell you a car too?

Hey, I bought a home during all this insanity. When they told me what I could afford… I literally laughed in their faces!!! Then.. Proceeded to tell THEM what I could afford and what to look for.

No one is gonna bail ME out for making a WISE decision are they? Who’s gonna give ME a break on MY mortgage? No one of course.

There always was & will ALWAYS be someone out there trying to sell you something you cannot afford. It’s up to YOU to protect yourself.

Yes we need to ride this out. Let the people who made these decisions take their lumps. (maybe living in a trailer park for awhile will teach them something). And let Real estate take it’s hit.

What I feel SHOULD be done is tighten the standards back to reality (If they can’t afford it, they can’t buy it), that will get these builders to STOP building these huge overpriced welfare traps, and people will be able to afford housing again.

And then go after the institutions who allowed all this insanity to happen! THEY are the one who got rich off all this! Now fine them severely and use the money to help create affordable housing for all!

Just my honest opinion.

Bravo to Harry Pecci for telling it how it is, directly from the frontlines. I have 37 years in the real estate/ mortgage business working the last 14 years for one of the biggest and most respected lenders in America. I oversaw an average of $100 million per month in fundings during the past 7 years; I know what I’m talking about. During 2004 and 2005 when a huge number of Option ARMs were being done, our company elected not to do them. We did not think it was in the best interest of our customers or stockholders to originate and fund these types of mortgages. Our sales force and managers were not very happy about it because they missed-out on about 20% of the market. Nevertheless, it turns out that our senior management made the right decision. Lenders like Countrywide, WaMu, Wachovia and many others that did these loans are not yet telling the market to be prepared for these Option ARMs to default. Not only were these borrowers not paying any principal on their loans, they were not even paying the required interest. That unpaid monthly interest is added to the loan balance causing a negative ammonization of the loan; the loan balance goes up rather than down. Add that feature to the fact that the base rate is now rapidly adjusting upward causing either the payment to rise or the negative amortization to increase or possibly both. From what I have heard, the people who took these loans started with little, if any, equity or down payment. With shrinking property values, their home value has probably decreased, while at the same time, their mortgage balance has dramatically increased. Not only do they have no equity in their property, it is very probable they owe 5 to 20% more that the property is worth. Most of the Option ARMS are due to start resetting in October. Wait till you see the effect of these insidious monsters. The subprime debacle will be nothing compared to this. There are a number of things to keep in mind with this situation. First of all, borrows need to take personal responsibility and accountability for taking on these loans and borrowing under these terms. Did they really think someone was going to lend them $300,000 at 1.95% for 3 or 5 years without some negative repercussions? DUH! Did they bother reading any of the documents and multiple disclosures given to them at the time of application, again at loan approval, and again at final closing? Yes, there were some slimy, fraudulent mortgage brokers out there pushing this product and failing to disclose all the terms and nuance of this product. They should be found, indicted and prosecuted to the full extent of the law. They need to be punished harshly. The lenders who did these loans will or have been effected though the closing of their business (American Home Mortgage, now defunct, is the poster boy of the Option ARMs) or the significant reduction in their earnings and stock value. For the rest of us, it is not Armageddon. If you purchased your house for $150,000 and last year it was “worth” $350,000 and now it is only worth $300,000, you haven’t lost anything. Stay put, housing values will come back one day; no doubt about it. I’ve been through this kind of housing cycle 3 times already; we’ll eventually be OK.

The problem is very simple to understand. With average family incomes around $45,000, you can’t be buying $800,000 houses. Normal rules may be stretched for this average family to afford a $110,000 house. One just has to look at stagnant worker’s income and even a moron can see houses are very much overpriced and that the current problem will surely deepen and last for a long time. No matter how much “positive spin” the so-called experts and gurus expouse, house prices are headed down, and down in a big way not since since the 1930’s.

Believe it or not some of us saw the frothiness happening in the real estate and stock market happening around us and just started stock piling cash. I didn’t pull out my 401k investments or anything like that, but my small house is paid off, and I’m saving up to purchase my next house with my current houses equity (no matter what it sells for, because I can take a beating on it if I have to with 100 percent equity) and cash, with a possible 20 percent mortgage. This is what I like to call fiscal conservatism. Use a sinking fund (saving with interest) to make large purchases, and keep your debt to income ratio as close to 0 as possible. Of course that is insane in the gotta have it yesterday mentality of today where first time home buyers are buying mc’mansions, but our parents parents had it nailed down good. They started off in small houses or rented until they had MONEY, not debt to make purchases of nice homes.

Just imagine having actual cash in hand when you come to close a deal. It speaks volumes to the seller that you are a serious contender, and almost always puts you in the drivers seat in a negotiation.

Curiousity begs me to ask in response to several opinions. Some have said the part of the housing problem is retirees putting their homes on the market increasing supply. I don’t get it. As a soon to be retiree I feel the greatest security I have is enjoying the fact that my retirement home is paid for. Where do all these retirees live after they retire if they sell their homes????

This is poetic justice for the widespread predatory lending practices that have been preying on those among us who can least afford the rates, for several decades. I don’t feel a bit sorry for the banks who have been posting quadruple record profits, on the struggles of the working poor. If you want to solve the crisis, I think the government needs to put some limits on these predatory practices, in order to provide “affordable” credit to the credit challenged.

The whole “credit score” driven money market is really nothing more than a get rich quick scheme, that can never work for the long term. They shouldn’t have made it easier to get credit, at crummy rates; but instead they should have made it easier to get credit that people can actually afford. For example, people with good credit scores can get car loans at 0% interest; while people with less than perfect credit pay as high as 17%. At the same time, they are also paying 25% or more, on credit cards. So, the well off end up with low payments on high value cars, while the credit challenged end up with $500 per month payments on $14,000 cars. You do the math! Are these people more or less likely to be late or default on their loans? Of course they are more likely to be late, thus keeping them in this never ending cycle of low score/high rates; and that is exactly what these lenders are counting on! The odds are stacked against the struggling young families, from the start. All because the money market boys get dollar signs in their eyes, when they think of 17% compounded interest — it’s pure greed!)

We all know that every one needs transportation, yet the people who can afford the most are paying the least and the people who can afford the least are paying the most. How can that kind of market strategy sustain itself, in the long run? To me, it puts the lenders in the same class as loan sharks, and investors are their greedy accomplices. Why not settle for a few less percentage points of profit, in the short term, in order to maintain a sustainable market in the long term?

I’m glad it’s finally going to bite them in the butts, even if it means that fewer people will buy homes. It is not a fair market, and the odds are stacked against the working families. Why should we be sorry that the banks won’t get to continue this practice which has a further detrimental affect on the working class, by artificially inflating the cost of housing — all for the sake of unrealistic and predatory greed?

A correction (and slap on the wrist) is long over due, as far as I’m concerned.

We are not in the housing slump yet. We will be soon as cities like New York and Los Angeles start facing double didget declines in the housing market

First time buyers? Real term incomes have not risen for over 15 years now, the last figures published show a median income of roughly $40k. The answer is simple: there are no first time buyers any longer - over half the population can’t afford a house. My bet: give us 3 years and we are going to see massive emigration - after all, Mexico isn’t that bad. Just look at how many Brits live in Spain now.

This mess we are facing has to do with our monetary system being a complete fraud! Woodrow Wilson signed into law the “Federal Reserve System” in 1913 which took away the power from our congress to create money interest free and handed it over to foreign elitist bankers to be able to create our “money” out of thin air and charge interest on it to borrow! As far as I am concerned every person in washington including George Bush are ALL TRAITORS to the people and should be serving life long prison sentences for treason.We are all enslaved by this corrupt illegal system and will continue to be unless the “Federal Reserve System” is abolished and an honest system is put into place to benefit EVERY PERSON not a few.

The mortgage crisis will spread to every city in our Nation like an uncontrolled cancer. It will not pick and choose price range, in fact, no price range is safe. Lowering interest rates is a pie in the sky approach, because rates are not the issue. We have a serious over supply and under demand issue coupled with a Nation’s thirst for keeping up with the Jone’s. We are buying everything on credit, using our home’s equity as an ATM, along with charging and borrowing much more than we can afford. Our society has come to only understanding fulfilling our wants in the most expedient manner, using credit instead of saving for the item or far more important, saving for a rainy day. Shame on us! We’d feel better blaming someone or something else (mortgage industry) for this ensuing problem, but in the end we have no one else to blame but our ideological way of life we’ve come to expect.

We are in for a huge crash come september. A lot of people who think they are rich wont be able to get their money out of the market because of lock ups. Housing will take a major dive as well. Hold on to your hats.

This is not just a mortgage crisis, but part of a bigger financial story that has been playing out since the late 90’s. It first began with the crazy speculation in the stock market in the late 90’s which ultimately bust when people realized most tech companies would never make a dime. To keep the economy going, the Fed was forced to lower interest rates to levels never seen before in U.S. history. With the party over in the stock market, everyone jumped into the easy money being thrown at them to purchase homes, which created the housing bubble. Money hunger bankers, real estate agents, brokers, builders, etc. fueled the fire of the housing boom. Naive buyers believed what they were being told because, unfortunately, most average Americans have little if any financial education. People with no financial sense are unable to understand or balance the risks involved putting 0% down or using exotic loans all while maintaining a negative savings rate. The same speculation that drove the stock market got transferred to the housing market. On top of that, the “financial gurus” are unwilling or unable to assess proper risk to assets these days, whether it be stocks, bonds, or housing. So the Fed now is forced once again to inject liquidity into the market to keep the money flowing. But now it is in a very precarious position. The possibility for high inflation and the current state of the weak dollar tells them they shouldn’t be decreasing the rate. But they will be “forced” to once again by a deteriorating economy which could very likely fuel another bubble in the stock market since people have a hard time remembering the past. Thanks to our lack of financial sense, our economy is now completely dependant on the Feds injection of liquidity to keep it afloat. Eventually the dynamics of the global economy will cause the music to stop (despite the Fed) and the pain will have to be felt and at that point we will all begin to see this is just the beginning of a large adjustment in American workers salaries, buying power, and financial security.

I have been in the mortgage industry 24 years and have experience in all facits of residential lending including Sub-Prime. I was also around for the correction in this industry in the mid to late 90’s when Wall Street no longer wanted these types of loans.At issue here is the over reaction of the market , many people who purchased property with a sub prime loan in the 90’s enjoyed extreme property appreciation and are financially better off today . I also see Fannie and Freddie automated underwritting approval of loans with Debt ratios of 59 and 60% of gross income at 100% of property value. Will the MI companies be the next big thing in a year or so? I agree many of the exotic Alt A and Sub Prime loans should not have been written but Wall St was securitizing the product willingly. Consumers were over spending , like buying a Mercedes when they should be in a Buick , to keep up with the neighbor and they bet on continued appreciation in the market which didnt happen. I do not believe the Fed lowering prime will have much effect on this since the only people who will be able to buy will be those with steller credit or huge down payments. I wonder how much money was funneled into the economy prior to 2006 from these loans to these borrowers that will funnel no more.

We are just hitting the tip of the iceberg on all of this. I do not think that we are going to see the light at the end of the tunnel by the end of this year the way some people are saying. I have been a NYS Mortgage Broker now for over 8 years and the writing has been on the wall for a long time. Problem is that nobody knew how to read it. The Government and the Politicians are pointing fingers at people like me the Broker when in reality the banks financed the loans not us. I live in NY and have seen some really crazy prices with people who have financed 100%. Now that the values have come down they have no equity to do anything. I deal with a lot of people in foreclosure and it would be nice to hear one of these banks at least try to help the borrowers. They don’t. I have had some lenders tell me that they don’t care if I am refinancing these people. They are selling the house when they are selling it no matter what. How is that helping people. They are not offering the lower rates like the papers keep saying. I have dealt now with over 25 banks and none of them and have tried to help these people out. They have suggested filing bankruptcy. That is one of the worst things they can do because now they have a trustee to pay and the mortgage they couldn’t before. Someone out there needs to open their eyes and realize we have a problem and we are not even in the heart of it yet. This will get worse before it gets better. We have banks that no longer honor the loans that we have locked the rates in for our borrowers. Banks are actually not honoring a commitment that we get from them to put our borrowers at ease. So I tell all the politicians out there open your eyes and see the real problem and fix it before its too late.

1. Anybody trusting the spin of either the NAR or the FED are not paying attention. For eight years both insisted that there was no such thing as a national housing bubble, now they say its over. Nothing is over the worst is yet to come. The median housing price is $220,000 to $230,000 and the median household income is still between $42,000 and $45,000, meaning the average person still can’t afford the average home. We now have twice as many houses as households and the retiring Baby Boomers are now trying to sell to the much fewer Baby Bust generation. this is a long term housing downturn. It should be noted that economics is a reactive science rather than a predictive one. 2. Then ask why the goverenment quit publishing the M3 figures. The money printing presses are working overtime. We have a hidden inflation rate of about 10% which will rise with the War debt and the financial bailout from the housing bubble. 3. Energy caused the recession and inflation of the 1970′S and is looking as bad with China, India and other now competing for the rapidly dwindling supplies. Energy alone may cause a recession. 4. The infrastructure crisis: transportation, sewer & water, the aging national grid, old oil and gas lines, and power plants, and municipal services needs are overwheming. 5. The national health crisis. 6. The growing GINI index and the gap between the rich and poor.

If your not afraid, then you are not thinking.

We headed for free world depression with high gas prices, the Fed raising interest rates too much and too fast for no real reason, middle class jobs going to India and China insearch of higher capitalistic profits, high cost of cars which have gone up 500 percent in 20 years — our economy is done for and if the war expands into Iran with the shut off of their oil exports — just stick a fork in the free world
economy as we’re gonners. China is the new super power and America is the new third world country with 17 trillion dollar debt. Uncle Sam don’t care and won’t try to help at all — anyone — rich or poor we all going down together.

Re: Phoenix, Arizona : August 20, 2007 2:45 pm post:

“I can not do a thing to help them.” Why of course you can. You can offer your own money to reduce their debt. Surely you’re willing to do that. Perhaps you could borrow on the equity in your house to come up with the money. After all, it was an act of nature that made them eat all the equity in their homes. Not their fault. Something like credit card purchases — not their fault.

Or are you only willing to ‘help’ them if other people’s money is involved?

Tell me, having been in mortgage lending for the last 15 years, what happens when the remaining equity in a mortgaged entity falls below the remaining note obligation? Don’t the mortgage holders have the power to foreclose even if payments are current? Or, if not foreclose, then renegotiate terms? How long will it take for those events to unfold? How long will it take e.g. BearStearns, et al., to form foreclosure real estate divisions?

I’m looking at housing dropping anywhere from 30 to 50% in cost relative to other assets before we get a market that resembles what we’ve had.The last big bust in the early nineties in California took 10 years to come back. This is much more wide spread so I don’t see any short term relief.

Well it is not all bad news for everyone. I was forced out of my old neighborhood because rents just kept going higher and higher. Landlords did not want to rent to families because they could not ask 3000-4000 dollars a month in rent so they prefered renting to 4 or 5 young rentes who could split the rent. Well I say its payback time baby. People like me are just waiting on the fence for those million dollar homes to sell for about 250,000 dollars and then maybe we will think of buying. Too cruel and mean of me? Maybe but those greedy landlords and realestate agents showed no pity for me or any other senior citezen who could not find affordable housing. Its payback time baby

I dont feel sorry for the mortgage companies I feel for the people who are losing their homes because of high interest rates and alot of deception. I hope the government helps these people out so they dont lose their homes.

There are two baby boom generations retiring - those too young to fight in world war II born in 1930 - 1945 who claimed to be ww II generation until tha late 1960’s then became baby boomers to be younger and those born with the numerically large generation from 1946 - 1963. The older of these two generations is finishing retiring and the younger generation is beginning to retire. Both were told to invest in real estate and the stock market to build wealth to retire with so they did. Now that they are retiring they need to sell for the money to live on. They need someone to buy what they have to sell but there aren’t enough buyers. This financial mess is just beginning and could make the Great Depression look tame. We might see a period of deflation as Japan did not so long ago and we definitely will see a great deal of political change. Baby boomers make up half the population and if they all unite and vote their pocket books they will get their way. There aren’t enough people to stop them outside their generations and older people are more politically active.
We are about to enter a period of great change in how medical care is handled, how home sales are handled, how stocks and bonds are handled, and how death is handled and large changes for women. Women live longer than men and the percentage who do is a greater number for a large generation than a small generation 5 percent of 1000 is greater than 5 percent of 100. These poor women have to be housed and fed and cared for somehow when they are left alone. They are not individually going to live in a large old house comfortably.

Think it is going to take a lot more time than just until “now” to correct. Figure at least another 6-18 months of pain for it to all shake out.

The runup didn’t happen overnight so don’t see it crashing all at once although it could come to a head all of sudden now with these constrictions. I live in south Florida and read an article in this weekend’s Sun Sentinel where some lenders are even accepting short sales for some customers in extremis. Very interesting.

D. Fenton
Coastal Atlantic Properties Inc.

As most have already commented, this will be a prolonged downturn. Not a sudden one that is over in 1 or 2 yrs. We won’t reach a bottom for another 4-5 yrs. at best. What could be done? The Fed. will have to cut the short term rates to allow borrowers to refinance their debt under more sustainable terms to protect the assets. I fear the Fed. will be slow to react as well as the financial institutions after licking their wounds from their recent mistakes. This is the best way out, but also the most fearful.

Almost all real estate -regardless of location- is wildly over-valued using income as a guideline.

Historically, property is valued @ 10 X annual rent-roll, since rental income closely tracks incomes. There is no ‘investment value’ (speculative value, that is) to any tenant occupancy. Real estate prices in the US have been recently based on investment value; the need to find a greater fool to return that investment. Excess iquidity -in the form of cheap loans- and Wall Street’s need for huge fees has created this bubble in the first place.

Bubble, bubble. Nobody makes anything in America anymore; investors bounce from one bubble to the next…. now???

All the appreciation in prices relative to income will have to be wrung out of real estate prices before the business ‘gets back to normal’.

I’ve been involved in real estate in various capacities for twenty five years and have seen many boom and bust cycles. Like the Savings and Loan crisis, the current situation is to a large degree structural. Mortgage loans and their derivatives are indecipherable and inscrutible and the institutions responsible for them are collapsing.. Unwinding the networks of investors and the tranches of loans spread internationally among large and small investors in a timely manner to salvage some home owners from foreclosure becomes impossible as the underwriting companies collapse and note-holders become insolvent for unrelated reasons. I predict that most of the mortgage-related securities issued in the past ten years will become the subject of (endless) litigation, enough to cause a great burden on the Courts. In the meantime the utility of any unburdened notes will be compromised… As more and more of the system breaks down the ability to re-construct it, both to salvage good mortgagers from the wreckage or to found a new home-loan system in its place becomes increaingly difficult.

Look to Japan and the time required to bring prices there in line with earning power of occupants. This bubble will take at least ten years to deflate and more time for the damage to be undone.

Additionally, many seniors, who own property are passing away and their property bequeathed to heirs -millions and millions of heirs. In order to satisfy both heirs, probate and the legal system, this property will likely be put on the market and sold for whatever it can fetch. This large amount of real estate will weigh considerably on the current market for some time to come.

Too much emphasis is now being placed on the ’sub-prime mortgage market’ as if it is the only game in town. No scrutiny is given to the source of the liquidity which manifested itself as cheap real estate loans. Garbage in =’s garbage out! When investors learn the same sorts of shenanigans have taken place in the creation of last twenty five years’ worth of liquidity as has been given to the use of it… God bless us every one, indeed.

>>>>>>>>>>>>>>>>

Who didn’t see this coming years ago? I work with hundreds of people every day, and I know they don’t earn enough money to pay for the huge homes that are being built everywhere you look. Builders, lenders and borrowers brought this on themselves. Anyone should know that a $70K income cannot buy a $400K home, and pay for utilities, food and gas. I can only hope there won’t be a government bailout, but I’m pretty sure there will be.

I’m a Financial Consultant in California with many real estate centric clients and worry that this entire real estate bubble still has much further to deflate. We are seeing an abrupt reversion to traditional mortgage lending i.e. a significant cash investment in the property and either fixed or variable 30 year loans with realistic rates and demonstrable affordability . Absent rapid and obviously unsutainable (in hindsight) price appreciation, the traditional measure of prudent home investment was a purchase price of between three and four times gross household income. Since Los Angeles County has an average household income of approximately $68,000 and a median home price that reportedly hovers around $520,000 it is easy to see the disconnect. Either incomes must rise to justify the mortgages required to finance current home prices, or prices must fall to where homes can be financed out of current incomes. With many potential buyers unable to realize the equity in their current homes, their ability to purchase must be constrained. My conclusion, which I hope I’m wrong about, is that prices may prove to be more elastic than incomes.

I am happy to report that some “experts” saw the housing bust coming in 2005 and warned their clients well in advance.

Go to The Capital Multiplier website [www.capitalmultiplier.com] and read the reports from the first half of 2005…it’s all there on the website archives.

CM’s latest reports suggest that this U.S. housing bust will end only after further “double-digit declines” in U.S. home prices and a MAJOR correction in global stock stock markets.

The worst is yet to come. Wait until all the “options arms” start adjusting. There will be a lot more forclosures where that product was used that loan to qualify for over- valued properties, think Southern California.

The overall majority of those give their opinions indicates continued problems with realestate for some time to come. I to feel this can and will spread to other sectors. Congress cant solve other pressing problems and I dont expect much help either. Their too busy trying to kill each other or getting elected president. God help us.

My portfolio advisory newsletter editor James Stack (Investech) predicted all this to the letter globally for the U.S. over four years ago. We are still far from the valuation bottom and very probably years away from its resolution. 15 years ago the Japanese thought they were immune to such residential real estate corrections due to being land-locked, and supply/demand. The Japanese were painfully wrong. Their real estate market trended gradually and steadily down over that period to a depth much greater than the U.S.’s average correction to-date. Forget the fact that the U.S. has plowed into financial excesses that Japan had not. I haven’t seen a word in the U.S. press about the Japanese real estate experience and received the information only through James Stack. Years ago Stack predicted it would eventually take a trillion dollar federal bail-out to clean up the U.S. residential real estate problem, making the S&L clean-up look like a comparative cake-walk. It’s probable the feds will declare the financial industry at large too-big-to-fail. A 15-20% correction in the value of a residence foolishly leveraged to 125% and used like an ATM card for every financial whim, is catastrophic compared to an 80% correction in someone’s dot.com portfolio five years ago.

Those who think the high end can’t come down will be proven wrong eventually. Right now the very wealthy feel that they can’t lose, as people with money aren’t affected by downturns like everyone else. Of course the truth of the matter is that many of those who appear to be truly wealthy are not, and when those who have stretched a bit too much on the high end, have to sell, eventually the truly wealthy will realize that they don’t need to offer as much for their next property.

Prices will come down almost everywhere. Real estate may be local, but the markets in some of the booming areas require buyers from other once booming areas. The slowdown may take a while to reach certain areas, and those that believe that the sky high rates of return are a sure thing will be hurt.

In case anyone hasn’t noticed, there are many real estate markets across the US that continue to fire on all cylinders. Some are again out of balance to the SELLERS side of things, Yes, that’s right. In the San Francisco area for example, we currently have referred clients that have just placed an offer on a condominium listed at $799,000. They offered $840,000 for the home and they didn’t get it. They missed out to another buyer who offered $899,000. No, this is not a post from spring 2004. It’s August 21, 2007.

Please inform the sub-prime chicken littles who claim the real estate market sky is falling to wake up and smell the Starbucks coffee wafting from the mugs of young, doing-quite-well-thank-you, tech execs in the Bay Area driving area real estate listings off the charts … again! What’s a bubble believer to do? I guess ignore this well unpublicized fact. There are many real estate markets around the country still chucking along quite well, which quietly go unnoticed and unreported.

Along with the San Francisco example above, the Santa Barbara area real estate market is another pocket of outstanding performance. The markets of Montectito real estate and Hope Ranch properties lead that market with outstanding appreciation of 13.7% YTD within the Santa Barbara California real estate marketplace

But forget that. Instead let’s focus on the “devastating” increase in foreclosure filings, up to a whopping 1 household in 879 across the US. So, let’s see, if that one house goes to bank auction let’s say, (which usually sell for close to market value) how much of an effect will that actually have on the other 878 that didn’t? I wonder. How many of the other 878 would even notice. It’s certainly no fun for the one who faces such a situation, but 1 in 879? Please! That’s .001% of the total marketplace.

Does anyone remember in the late 1980’s when these foreclosure numbers were painful. Remember the Savings and Loan debacle, and the junk bond scandals. The millions of square feet of office space left unfilled. The Resolutions Trust take over and sell off of massive inventories of over developed commercial and residential properties. All triggered by a 1986 Ronald Reagan sparked tax law change for investment real estate. With interest rates 1/2 what they were then and no restrictive tax law change to insight it, we are nowhere close to “smelling” that brand of coffee this time around, with only one bean in 879 being “ground up”. (BTW, that did turn out to be a great buying opportunity. Just ask Robert Kiyosaki. But that’s for another day.)

After 23 years in this business, I’ve come to know my share of so called real estate “sharks”. You know, the kind that circle around and wait for the bottom to fall out, the kind that move in when they smell blood in the water. Most talk a good game but never seem to be able to pull the trigger. (Probably because that game requires oodles of cash.) I’m here to tell you that they are all starving to death. Many have been waiting for 6 and 7 years now and in the mean time have missed some excellent appreciation opportunities, particularly in the high end markets where this type seems to hover, thinking that is where the greatest fall will be. Many properties they passed on as being “too high” have since doubled in value. And still these “geniuses” wait. Far to embarrassed to admit they missed a very nice ride in the last 7 years, and to proud to confess that it will most likely continue albeit not at the pace of the 2001 to 2004 run. A nice average sustainable, reliable, comfortable 7% per year looks good from here on out. Think of that. At 7.2% appreciation per year, your home value doubles in just 10 years. Will all markets see this type of appreciation, probably not. But “blue chip” areas, where the baby boomers are looking to end up will. Sun belt areas of temperate climes and desirable lifestyles. That ‘s where the boomer spending of trillions annually is focusing. That’s where to bet the farm, or buy a farm, or start an organic farm where health conscious boomers can buy some produce. But rest assured real estate holdings will continue to increase in value in these areas because as the venerable Will Rogers once said. “They ain’t making anymore of this stuff.” And for Boomers, demand for real estate in areas offering particular lifestyle choices will continue to rise.

The over-hyped sub-prime situation is a bit comical. Sub-prime mortgages are high risk instruments. The lenders know it and so do the buyers of that type of paper debt. Those mortgages are actually where a bank finds a person who has demonstrated a lack of ability to pay debt as well as “A” borrowers do, and makes it even more difficult for them to pay back borrowed money by charging them even higher rates than conventional loans. The logic of this escapes me, but there it is. So when these borrowers default, it’s like some kind of unforeseen happenstance, when in fact, they are set up to create a greater likelihood of default. So increases in sub-prime defaults are a surprise because…..?

It’s funny how public opinion is swayed by sensational press coverage. This latest sub-prime overblown focus and effects are the latest in a long line. 100% financing of anything has never been a prudent idea and never will be. The marketplace will always find itself, if left to do so.

The fact is that more burdens should be placed on the lenders making such loans, not the borrower. Appraisals should be required to be at least 105% or more of the contracted purchase price. That way a built in equity buffer would exist for borrower and lender to allow for market corrections. To charge higher interest on 100% financing is just begging for trouble. Force these borrowers to work harder to find better deals instead of penalizing them with higher rates and mortgage insurance, which only exacerbate the situation. Make the lenders, through this appraisal process be more responsible in originating such loans. This would also serve to stabilize real estate markets from being overleveraged as all purchases would contain equity, either in the form of a conventional 10% to 20% downpayment, or a sub-prime loan value of less than 100% of appraised market value. In this way, all could pursue their home ownership dreams. There is no more universal desire in this country than that of home ownership. We do not see that changing any time in the foreseeable future. Again, I defer to the esteemed Mr. Rogers who said “Don’t wait to buy real estate, buy real estate and wait.” By putting more reasonable constraints and responsibilities on lender origination of less than “A” credit, the sub-prime bumps in the road would all but disappear.

I believe this will continue for several more months with some lingering effect for 1-2 years. I believe this because it has been a long time coming - I was wondering when it would finally explode.
When we bought into a condo conversion 12 years ago in Seattle 8 of the original 60 units went bankrupt and 6 of those 8 were with Countrywide. In just the one condo complex we lived in we had a greater than 10% bankruptcy rate with homeowners through Countrywide.
Now not to ding just one company (and maybe there was a more aggressive agent running loose with financing that particular condo complex), but side effects included homeowners not paying their condo dues and thus the Board could not keep up on maintenance. It took about 6 years for all of that to flush out. As maintenance was not done the prices stayed lower than other condo complexes in Seattle as some homeowners who purchased the bankrupt units got the units on the cheap and thus did not want to spend $$ on maintenance either. It took 6-8 years for that process to vet out.
Excessive subprime loans, in the case of condos, hurts other homeowners. I’m sure neighborhoods with some subprime homeowners who could barely afford to keep their house/yard maintained have negatively affected the house values for their neighbors.
The CEOs who got us nationally into this mess affected a lot of other people than just those who took out loans they couldn’t afford.

“The market in a high end town of Manchester-by-the-Sea, MA has seen some impressive gains in the last few months.”

Oh, give me a brake! Any numbers of that “impressive gain”? And what % of MA market is represented by Manchester? 0.01%? 0.0001%?
I bet you are a real estate agent with eternal mantra “now it’s a good time to buy”, aren’t you?
I’m sorry to say that, but many people are stupid. They still buy now despite of the fact that even “independent” major mass media that heavely depend on real estate ads money start publishing truth about “real estate boom”.
I personally know a young guy that just consolidated his creadit card debts and has no savings at all that is going to buy something now.
They buy despite of the current market crash. I even read about “bidding wars” NOW in MA! Can you imagine that?
Although it can be lie from real estate agents - they lie all the time.
MA had two spikes in sales: January, when all of those “experts” started predicting, “we hit the bottom”, and in July. So what?
Don’t forget that April-July is the hottest sale season in real estate market. But look at statistics: price and sales during this months are falling. What kind of statistics we will have after the “hot season”?
MA average household income is 47K. Average single family home costs now around $330,000, i.e. 7 times of the average household income!
If you check any “Which house you can afford?” calculator, you will see that it’s usually up to 3 times of your household income.
So, in order to buy a average house in MA you must have at least 100K household income.
Even worse: in most areas around Boston (up to 50 miles) you will be happy if you find some red neck’s shed built 50-60 years ago with carpool in blue color neighborhood for this “average” price.
I fact, Boston Globe a few month ago published an article about “affordable” places in MA. In their terms, “affordable” place is the one that has average prices 270-330K. Naturally, household income and quality of life in those “affordable” places are lower than the average in MA.
In my opinion, MA real estate market will fall big time. I saw as much craziness as in CA here during so-called boom.
“The family that has 60K household income figured out they can afford a house for $400,000. But they cannot find a house for this price in Dorchester.” (Boston Globe, summer 2005).
How do you like it? How in the world they figured out they “can afford” 400K house???
BTW, Dorchester is responsible for 40-50% of crime, including homicide and gang activity, committed in Greater Boston. Yet, they could not find anything in that “great place to live” for less than 400K!
This is definitely a sign of steady real estate market!

Awww, crud! I’m on eof those people who overbought two years ago, my rate is readjusting in December and I have to plan very carefully in order to make the new payment amount. YIKES! I think I can make it, but the trip to Disneyworld will have to be put on hold. sorry kids, but we live in our “vacation” spot now and for the next few years. Hey honey, you have to get a job to help out.

The sub-prime market has been pillaried, as it should be. On the other hand, there seems to be a dirth of commentary dealing with the ‘responsible’ banks who possibly contributing to the over-inflated home values by extending mortgages beyond the real value of the property. This practice is expecially evident in the New England area.

Could it be said the banks were the SPECULATORS at least as much as the individuals who were just seeking a place to live? Did banks have a practice of granting loans 25% to 50% over the real value of the property? I think they did; and in so doing made more revenue to the bank, higher real demand for property, escalating an artificial real estate value in the neighborhood, making owners think they were worth more than they in fact were, at very serious risk to all.

Tell me Mr. Banker, what did you accomplish?
joe leonard
boston

As the article noted, wealthy people don’t overly concern themselves with how much a house costs to purchase. The same can be said during times when they need to sell. If they want it gone, it goes, no matter how much they need to go down in price. On the one hand, this is not a concern for the majority of buyers/sellers in the $417K and below range nation wide. On the other hand, there has been a large group of recent buyers who, due to easily available credit, are part of the “if you can’t make it fake it” category. The fire-sale prices by the wealthy are dragging down their comps 10-30 percent right now. Combine that with the fact that people in their situation can no longer obtain home loans… you can see the pressure toward prices spiraling downward. Bigger and better is a fading fad. People are going to be more satisfied with comfortable and safe shelter, at a reasonable price, given their current debt ratios.

Ditto Andy Napoleon — why didn’t the “experts” see this coming? Even worse, why can’t they figure it out now and why do they refuse to listen? The real estate market, like all other markets, is driven by supply and demand. Ten years ago I projected the market would crash in 2006 and have it written in my own handwriting. It’s this simple: American homebuyers enter the market at a national average age of 33. That means in 2006 we needed those who were born in 1973 to enter the market as first-time buyers. Birth rates dropped significantly from 1972 to 1973, which meant there was a decline in first-time buyers. First-time buyers drive the whole market — they begin the trade-up process. When a first-time buyer buys a small house or condo, they “bump” that homeowner up to buy something larger. That homeowner is then able to buy something even larger from someone else. That person is now in a position to build new construction, and so on. The first-time buyer can cause three or even four transactions. To make matters worse, 2006 represented the first year the baby boom turned 60. So the boomers began putting their homes on the market to prepare for retirement. The number of homes (supply) available for sale drastically outnumbered the number of first time buyers (demand) coming in at the bottom to start the process. We have a skewed ratio of supply and demand and all of the rest of it (low demand for mortgages slowed mortgage apps and cause that industry to crash, low demand for new construction mean new home starts are down) — it is all a by-product of skewed supply and demand. This is why there are too many homes on the market in every price range, in every city, nationwide. In the meantime, the experts keep creating maps and charts and scratching their heads trying to identify geographic trends. I have been saying it’s a supply & demand problem based on birth rates since day one and even copyrighted this theory way back in October of 2006 when the “experts” were still saying we were in a correction year and that 2007 would be better. If someone would just look at the housing charts and birth rate charts (easily created using data from the National Association of Realtors and the Census Bureau)it would be as clear as day and maybe this could be solved. Since the birth rates do not begin to rise again until 1978, meaning the Echo Boom will not enter the real estate market until 2011 — we have a very long road ahead of us unless something is done. Especially since thousands of Baby Boomers are turning 60 each and every day and putting their homes on the market so they can retire. The biggest shame is that no one can figure out that the baby boom drove the last market and the echo boom will drive the next one, but that we are in the valley in between them. There is another boom just around the corner — can’t we figure out how to get them in the market four years sooner? How about a tax incentive for their baby boom parents to encourage assisting their echo boom kids to buy their starter house now? How about encouraging the baby boom parents to invest in a starter home and become their kids’ own landlord, rather than having them out their renting apartments? It’s just not that hard and it did not have to get to this point. The fact that we had a baby boom, we have an echo boom out in the wings and we had low birth rates in the 1970’s is historical data that needs to be factored in.

We are witnessing the first wave of a serious housing downturn that will last another two years or so.

David Bethlenfalvay Phoenix, Arizona is wrong about the greatest crisis. Do we really have to feel sorry for all those people who used their homes as AMT machines? A 25% or even 50% decline in house prices will made homes more affordable to people like my son who is saving 25% of his income to try to buy a decent house in our neighborhood.

Wil - a lot of “speculators” have made a lot of money over time. Sounds to me like you’re speculating too. Of course we were due for a correction, and I agree that the next couple of years will be a great time to buy.

I don’t think the mortage banking industry will grind to a halt, and I do think a little dose of realism is good for real estate, as with any other market.

Let’s try the math. Average American house is worth $230k, 5% of the 150 million homes go belly up, that’s a loss of $1.73 trillion dollars. Let’s say we recover 60% of these homes value, for a real loss of about $1.04 trillion. Add the loss of the value of the other 95% of US homes not in trouble, lets say down 5%, a loss of $1.64 trillion, for total housing loss this year of $2.68 trillion or about 20% of the GNP ($13.1 trillion, 2006). Lots of assumptions but its probably close. Check the math, maybe there is a mistake.

Yes, prices will come thumbling down, much likely they did in the eighties. The higher end will be the most affected…I have been in Real Estate sales for 20 years and the situation looks freightening…

What is the President supposed to do for people who used their homes as ATM’s or borrowed more for housing than they could truly afford? What makes this a governmental responsibility? Isn’t this more a function of poor personal financial management?

If you made a poor choice, shouldn’t you live with the consequences of your own actions? Or do you want the federal government in the business of approving of each household’s major financial decisions?

Welcome to the Nanny state where the government absolves you of any responsibility for your own irresponsible borrowing decisions.

YES I DO FEEL THE SUBPRIME MORTGAGE COLLAPSE WILL CONTINUE TO SPREAD.WITH A ESTIMATED 600 BILLION OR MORE OF WHAT IN REALITY IS GARBAGE LOANS,EXPECTED TO RECAST IN THE NEXT 12-18 MONTHS.WHAT ELSE COULD POSSIBLY HAPPEN.IN MANY LOCATIONS THROUGHOUT THE COUNTRY,ESPECIALLY CALIFORNIA,WHERE ALREADY SEEING RECORD FORECLOSURES.NOW IS A GOOD TIME TO BUY,BUT BUYERS ARE LEARY,AND RIGHTFULLY SO.WITH RATES NEAR HISTORIC LOWS,STILL VERY FEW BUYERS,I BELIEVE WHERE HEADING FOR A MAJOR RECESSION.

I’m a loan officer working out of a Real Estate Office. The worse is yet to come in my opinion:

Unscrupulous loan officers and aggressive/unethical Realtors convinced too many people to “buy” homes who had no business buying real estate (not enough income. no down payment and borderline credit). They convinced them that they couldn’t go wrong because of the appreciation factor (”you can always sell it in a year and still make a profit”).

100% financing, with a credit score as low as a 620, and without income documentation was a recipe for disaster… and now Wall Street is surprised????

It’s gonna get worse before it gets better!

I do not believe the worse is over nor the problem is confined to the sub-prime mortgage alone. Everyone has gone overboard with their spending (the poor ones went with the 200K house that they can barely afford; the super rich went with the 2M dollar house and the 100K cars). So, we are going to have the pay back period soon if not now. I pity the foreigners who lent us their hard earned money, the money made one cent at a time (by selling us those toys and what not).

Throw demographic realities in the mix and “correction” will be a relative term. We sold our 6,000 s.f place earlier this year, to downsize, and now find ourselves quite content in less than half the home. Exactly who is supposed to buy all these outdated custom homes with outrageous utility and tax bills five years from now, ten years from now? Assets will turn into liabilities before our eyes as the baby boomers head for the exits. We count ourselves fortunate to have been early.

I live in Manhattan and that is one place that will never go down. It has been going up all year. Miller Samuel has articles online that say how NY is doing well even with the current crisis. People should be buying in Manhattan as it should at least double every year from now on.

The “greed is good era” may finally
have run its course… Sad that so many
people will have suffered by either losing homes and/or investments.

The destruction of “vapor money” will
continue and will not stop at our borders. It is time to stop worrying about getting that xyz percent ROI!

We have extremely overvalued real estate in many markets throughout our country. This bubble was made possible by a credit bubble, an interest rate bubble and the exportation of the real estate bubble from New York to Florida and California to Phoenix, Vegas, Portland, Seattle and now Austin Texas where a postage stamp house is priced as if it located somewhere on Long Island. The housing bubble should be a “walked down by bankers” as few markets are under or fairly valued.

I was going to buy that $2 Million house with my stock options that were doing so well, after selling my current $1 Million home to a lawyer who was going to use a stated income loan to buy it. Buying that home made sense, couldn’t lose, since real estate was going up by better than 10% per year in my area. It was an investment.
What happens the price of a stock suddenly has a huge earnings “disappointment” ?
It may take awhile, but the high end obeys the same law of gravity as the low. Once the prices start down, these high end places can decline worse than the middle homes since you certainly don’t need that much house and it is a losing investment.
I’d say expect to lose 15% to 20% around here.

The market in a high end town of Manchester-by-the-Sea, MA has seen some impressive gains in the last few months. Houses at $1M+ are selling and at asking prices or very close to it. The real estate market is always local so by picking Larchmont for your story is not relflective of a trend. Recently there have been sales over $5M for homes near or on the water. Big money does not need to worry about interest rates, they are insulated. They may invest wisely or poorly, but they pay cash for a house.What may happen is that some people who are leveraged- regardless of income - will get hurt the most.

A critcial problem with securitiza
tion is that Wall Sreet has no long term interest in the deal once it is is executed/sold. If the buyer will buy sxxxx, Wall Street will find a way to package it to naive investors. The rating agencies are also at fault
but where is their stake in the losses now affecting American society. Most mortgage professionals knew that this would explode, but there was profit to be made in the good times so everyone cashed in while they could.

We are just seeing the tip of the iceberg in terms of people walking away from their homes, due to declining prices combined with rate re-sets on ARMs. Way too many people jumped on the bandwagon, looking for quick profits in real estate, and the banks (unable to learn leasons from the early ’80s and ’90s) were only too happy to accomodate them. Alt-A lenders were making 100% loans on no-income loans based on a 660 credit score, a job, and two months payments in the bank. These were almost all three to five year interest-only ARMs, and those resets are just beginning. Many of the homes are now worth only about 80 to 90% of the purchase price, so there borrowers are stuck. Many are facing only one option: walk away.

Juat like any storm you have to hunker down and ride it out. So, unless you absolutely have to sell, don’t, until the storm passes in about 18 months

Since 2004, I have been predicting that the overheated housing market in regions like California would eventually take a turn for the worse. I’ve lived in this part of the country long enough to have seen it happen before, and it was just a matter of time before it happened again. Only this time it will be much worse.

I have worked in Payroll/Human Resources for more than 15 years, which means I have access to salary data. Salaries even in Orange County, California simply do not support the overpriced, highly inflated housing market here unless you live in a household that brings in two six-figure incomes (most don’t). Yet housing fever made many completely delusional, blindly believing the housing market would continue to rise with absolutely no regard for the affordability factor. And prices did continue to rise throughout 2005 and 2006 as many home buyers and property investors, hoping to make a quick and easy buck, continued to buy overpriced homes, fueling demand and higher overinflated prices. Brokers, appraisers, lenders, and buyers all share the blame. Average Americans such as myself who refused (smartly) to commit to interest-only loans or ARMs were left unable to afford the American dream.

As home values skyrocketed, many Californians sold their overpriced homes and moved to other states like Nevada, Arizona, and Florida where many paid cash for new homes. Meanwhile, local residents in those regions were left to deal with rising home prices brought on by the increased demand and very soon found themselves priced out of their own market. Home builders continued to build to meet demand, largely spawned by investors involved in “flipping” practices.

When you build a house on sand, it will come down. Yes, the subprime mortgage collapse will continue. It will last longer than anyone originally predicted, it will be harsher than anyone would have imagined, and it will impact other regions of the United States as interest rates rise and mortgage lenders continue to tighten their belts. But then, I’ve been saying this since 2004.

i hope you greedy jerks go down! you dont know it but its the middle class that has been buying and now we cant afford these over priced dumps. so guess what? its time for you to go down, bye bye

Borrowers who typically are looking for homes priced at over $2 million are generally in very good financial shape and can purchase the home regardless of the interest rates offered IF the home meets their housing needs. The bigger concern lies in many larger cities such as Chicago, Phillie, Baltimore, etc where the majority of properties offered exceed $600,000. So even if a buyer has 20% to put down, they are still in a “jumbo” or nonconforming mortgage product with rates currently surpassing 8%. Further, the various regulatory agencies that oversee banks have recently sent out letters requiring banks to tighten credit underwriting for “exotic” loans. The most popular exotic loan is an interest only mortgage.

So yes, with an excess inventory of homes for sale, higher rates for jumbo loans, and more stringent underwriting, the housing slump will spread.

Two years ago I said people were nuts for taking the subprime mortages, and the banks were even crazier for handing them out to people who could not afford the payment once the rates adjusted…I am a high school dropout and I saw it coming..so why did’nt the lending institutions, and wall street see this mess coming? Must be GREED!!!!!!

I completely agree with prices of houses gone through the roof from 2001 to 2005 - It is time for them to come down. The prices of houses in east coast (same can be said for California/Washington DC) have become unaffordable.

To compound the problem the unstable job market and business makes it difficult to do long term planning. The globalization is forcing people to change jobs quite frequently and it is not correctly reflected cost of holding a non-movable asset.

I think slowly people are going to change the attitude about owning an house as more more people are forced to become mobile moving from one location to another. Furthermore, baby boomers are retiring so more and more houses are going to come into the market.

In short, I think uncertainity of long term job prospect at one location plus retiring of Baby boomers and recent runup of prices of houses would keep the prices down for a long time.

Thanks
Aditya

Both Real Estate and Financial markets have always been ruled by Fear and Greed. Right now we are in the Fear cycle. Prudent investors will hold on to their assets or acquire more in down cycles. I’m holding my real estate and just put another 50k in the stock market, and I am looking for real estate buying opportunities. I will make money, just as I have in the past down cycles. This is the difference between investors and speculators.

Liquidity drives markets, both up and down. The pendulum has swung heavily to the side of easy liquidity and loans. It appears it is now swinging in the other direction. Market correctoins tend to, historically, overshoot. In my humble opinion, having history on my side, when liquidity dries up, as it now seems appearent, the entire economy looks to slow, dramtically. And with that, as well as tighter lending standards for mortgages, I would hate to be on the wrong side of that trade.

I have been in mortgage lending for the last 15 years. I currently work for one of the ” Big 5 ” lenders in this country. Over the last six months I have been on the front line of borrowers calling in to refinance their homes. Many, many of them are now upside down in their homes, either by doing 100% financing to buy several years ago or by cashing out their equity ( also up to 100%) during the same time frame. I can not do a thing to help them. Many of these folks have tried to sell but can’t. Many more of them are in ARM loans and won’t be able to make the new higher payments that will be coming ( or already have adjusted) in the near future. These are prime grade credit customers, not sub prime borrowers.
These are not sporadic calls but the majority of my calls now. I work in a high volume office with a national 800 phone number. It feels to me we are only seeing the tip of the iceberg that is to come.
I have only heard now the Democratic candidates begin to address the issue. I have barely heard a peep from the Republicans and nothing from our fearless leader George W. Bush.
I sincerely hope I am wrong but my fear is that this will be the greatest financial crisis our country has seen since the Great Depression. Whatever hits us will ( and is already starting to ) affect world markets. I am on the ” front line ” with these desparate people. By some miracle hopefully this too will pass, but not before some extreme pain this country will experience in the months and several years to come.