Housing value risk - interesting article

[NotUrsula]

Just FYI, while CNN published the chart, they didn't create it. It is compiled by Local Market Monitor, a market research service that realtors and builders subscribe to. The 100 markets on the list are the ones that the majority of those clients care about, which is how they ended up on the list.

BTW, what happens to the speculators and the overextended is that they lose their shirts, even to the point of foreclosure, and it has already gotten bad. This month's Florida Trend says that Jacksonville had the 7th highest foreclosure rate in the nation for the first half of the year; ~144 foreclosures a month so far.

 

[Marie17]

Are you near an army base in Augusta? A few things that have happened in the market also - communities that were affected by BRAC (Base Reallignment And Closure I think that's what it stood for) are going to have some play.

Some bases are going to be very impacted by having MORE troops sent into an area and/or having troops sent out of an area. Let's say, your military base is expected to gain a division/unit that it did not previously have. Military bases only have so much housing available and the community will now have those members needing housing and the housing prices will at least remain the same but will usually rise. If on the other hand, troops are moving away from that base then housing will become readily available for others and the prices should go down very quickly.

We have friends stationed at Ft. Benning in Columbus, GA and they are expecting to gain a whole bunch of troops in the next 2 years and prices there are still on the rise due to the limited availability of housing in the area. Houses still sell very quickly in that market and it is expected to continue to do so for the next 2 years when that whole unit is brought over to Benning.

 

[Kay7979]

I've been trying to decide my next move - I live in a pretty economically slow area (used to be a booming industrial area, but not so much anymore), however the "big" city (LOL!) a few miles away has been doing a lot of development (they just announced a new theme park being built about 10-15 miles from my house, as well as the addition of other stores to that area) and I can see a big boom coming for this region. It *seems* like it may be a good idea to stick around here and get a decent paying full time job, save for the downpayment to buy a house while costs are low (I could get a huge, nice house for $100,000 give or take that would cost significantly more in most areas - if I stay in this city, I could get an older house but in good condition for between $50 - 75,000) and hope for this boom.

I'm not sure what you are contemplating for the alternative to staying put. If you are asking whether it is better to stay rather than pull up roots and move to some other parts of the country that is more economically prosperous, the answer is maybe. I assume you have family and friends now and that would be one benefit of remaining. Business and industry 10-15 miles away from you may not have a direct impact on your housing prices. It may be only the neighborhoods in very close proximity that benefit. Time will tell. If more jobs are coming to your area, it is hopeful that the tide of more disposable income within your community will "lift all boats" and improve the housing market in general.

I know what you mean about missing the housing boom. Until a few years ago, the Buffalo-Rochester NY area hadn't seen any significant housing appreciation since about 1990! I kept hearing about soaring real estate prices, and saw it in the Albany and downstate markets, but we were having none of it! I've noticed in previous real estate cycles that when the cycle peetered out and started on the downward trend elsewhere, Buffalo belatedly started to show some price appreciation. If prices soften here, it won't be much, as Western NY participated very little in the run-up.

One thing that seems ironic to me is the government, and agencies like FNMA, patting themselves on the back for making housing affordable to more people by lowering interest rates. Few people were truly benefited by lower rates. The low rates and lax lending policies artificially created new demand which in turn drove up prices. The increased prices wiped out the benefit of lower interest rates. Unless you were early to the party, when rates were low but prices hadn't zoomed, you're probably no further ahead than if rates were 12% and prices were still cheap. Worse, the increased prices drove up taxes, and we all know how likely it is that property taxes will ever go down, even if real estate prices plummet. So, now we are left with taxes so high in some areas that long time residents can't afford the taxes on the properties they have lived in for decades, and a lot of people who really couldn't afford to buy a house, or at least not AS MUCH house as they bought, are in financial trouble. As for the people who are counting spectaular housing gains as part of their net worth, the gains are paper gains only, and unless they plan on selling the property, the gains may go the way of dot com stock gains of the 90s. Ok, I'll stop ranting now.

 

[Brier Rose]

Are you near an army base in Augusta? A few things that have happened in the market also - communities that were affected by BRAC (Base Reallignment And Closure I think that's what it stood for) are going to have some play.

Some bases are going to be very impacted by having MORE troops sent into an area and/or having troops sent out of an area. Let's say, your military base is expected to gain a division/unit that it did not previously have. Military bases only have so much housing available and the community will now have those members needing housing and the housing prices will at least remain the same but will usually rise. If on the other hand, troops are moving away from that base then housing will become readily available for others and the prices should go down very quickly.

We have friends stationed at Ft. Benning in Columbus, GA and they are expecting to gain a whole bunch of troops in the next 2 years and prices there are still on the rise due to the limited availability of housing in the area. Houses still sell very quickly in that market and it is expected to continue to do so for the next 2 years when that whole unit is brought over to Benning.

The houses we've been looking at are in Evans,Ga. We just call it all Augusta because it all runs together!

Anyway it's about 10-15 miles from the base (Fort Gordon) which did not/will not be closing.

Right now it's not unusual for the houses that go on the market to sell within 2-3 weeks IF that! Most of the new construction gets put under contract before it's even finished! The builders won't even negotiate and the realtors say it's because they don't have to. If you won't buy it for their price, someone else will!

I feel like we're missing the boat here, but at the same time I just DON'T want to jump in and make the WRONG move!

 

[perdidobay]

I hope you have good luck in finding a new home, Brier Rose


I have been watching the housing market in the place I want to retire, Durango Colorado. An article in the paper there today stated the average home price is now 445K....sadly I can no longer afford to retire there, and do the things I'd like, such as traveling.

 

[MyGoofy26]

I'm not sure what you are contemplating for the alternative to staying put. If you are asking whether it is better to stay rather than pull up roots and move to some other parts of the country that is more economically prosperous, the answer is maybe. I assume you have family and friends now and that would be one benefit of remaining. Business and industry 10-15 miles away from you may not have a direct impact on your housing prices. It may be only the neighborhoods in very close proximity that benefit. Time will tell. If more jobs are coming to your area, it is hopeful that the tide of more disposable income within your community will "lift all boats" and improve the housing market in general.

Well, I don't know what my alternatives are, LOL. Obviously my "networking" is better locally, but I do watch online job posting for a number of areas to get an idea of what's being offered in various places. I've always been open to moving wherever I could find a job that made the move worthwhile (meaning, I would not have to live paycheck to paycheck) So the past few months I've been having this raging debate between higher pay, higher cost of living or lower pay and lower cost of living but potentional with guarantee for higher pay and still lower cost of living, trying to figure out which is the better balance.

And now that they've been announcing all of these companies and attractions coming to the area, I'm wondering if I can get in early with some of these companies since I have the advantage of a college education. Most of the people who are looking for work around here are former laborers in the mills and plants - people that finished college moved on over the years because nothing was available around here. So I have this debate in my head about should I stick it out and stay here where it may not be as competitive when these new jobs DO open up over the next couple years, and have the advantage of low cost of living and being able to buy a house on the cheap or do I move onto an already booming area where there is more competition, I wouldn't be able to afford a house for some time, BUT I could get started making a better wage now.

 

[salmoneous]

Anyone remember the housing bubbles of the 80's? Especially in the hot markets of New York and California prices shot up due to speculators, then the economy cooled, prices went down a bit, people with ARM's got clobbered, etc. Sound familiar?

The thing is, anyone still in those houses - even those that bought at the absolute peak prices, is loving life today. What seemed wildly over-priced then, now seems like a bargain. The people who got hurt where those forced to sell in the downturn immediately following the peak. Everyone else was fine in the long run.

I suspect well see the same thing with this housing "bubble." The speculators and those forced to see will get hurt. But people who stay in their house for a number of years, with fixed mortgage payments they can afford, will do just fine no matter what happens in the market.

 

[Brier Rose]

I hope you have good luck in finding a new home, Brier Rose

THANK YOU!

 

[disneymom3]

One thing that seems ironic to me is the government, and agencies like FNMA, patting themselves on the back for making housing affordable to more people by lowering interest rates. Few people were truly benefited by lower rates. The low rates and lax lending policies artificially created new demand which in turn drove up prices. The increased prices wiped out the benefit of lower interest rates. Unless you were early to the party, when rates were low but prices hadn't zoomed, you're probably no further ahead than if rates were 12% and prices were still cheap. Worse, the increased prices drove up taxes, and we all know how likely it is that property taxes will ever go down, even if real estate prices plummet. So, now we are left with taxes so high in some areas that long time residents can't afford the taxes on the properties they have lived in for decades, and a lot of people who really couldn't afford to buy a house, or at least not AS MUCH house as they bought, are in financial trouble. As for the people who are counting spectaular housing gains as part of their net worth, the gains are paper gains only, and unless they plan on selling the property, the gains may go the way of dot com stock gains of the 90s. Ok, I'll stop ranting now.

And don't forget that all these low interest rates effectively increased the amount of debt Americans as a whole have. Not that that is the government's fault because I strongly believe in personal responsibility, but you have all these people who did the ol' cash out refinance, paid off the credit cards etc just to run them up again. I don't think it's a coincidence that all these crazy lending practices, low interest rates and higher than ever consumer debt are going hand in hand.

We do have an arm, but it goes til 2010. At that time if we don't move we will be refinancing here, but we are mentally prepared for the jump.

 

[Kay7979]

Anyone remember the housing bubbles of the 80's? Especially in the hot markets of New York and California prices shot up due to speculators, then the economy cooled, prices went down a bit, people with ARM's got clobbered, etc. Sound familiar?

. . . But people who stay in their house for a number of years, with fixed mortgage payments they can afford, will do just fine no matter what happens in the market.

That is definitely true. These cycles do tend to run around 20 years. That's a pretty long wait, though. If you're young and have 10-20 years to ride out the cycle, it's no so bad. Unfortunately, many people are at a later point in their lives and can't wait it out, and even if they can, the value of their house, even if it returns to its former price years from now, really won't be the "same." If you had a $300,000 house in 1985 that dropped in value to $175,000 and is now worth $300,000 again, you're not at break-even, really. What $300,000 bought in the 1980s was HUGE compared to what it will buy today. . . things in general. How much was a car in 1980 compared to today? How much was college tuition? medical care? furniture? So you wait a number of years to "get your $300,000 house value back" but the purchasing power of that money has substantially erroded.

 

[punkin]

I would just like to point out that FNMA is not a government agency. It is a publicly traded company with shareholders. It is in the business of making a profit for said shareholders.

 

[golden1]

I'm not surprised that my area (Boston area) is considered overvalued. I'm actually surprised it is not considered more overvalued than it really is. If we had to buy our house now instead of 7 years ago, there is NO WAY we could afford it!

My in-laws build and sell luxury homes and they are already seeing a big slide in home prices and a huge increase in inventory, even in one of the hottest markets around here.

 

[spiceycat]

I can't believe that Birmingham area is so good.

I have seem houses - way of out of town - a good hour (in traffic) from where most people work.

well these houses were so overpriced for the area they were in - it is just plain silly.

but someone must be buying because every time I visit my friend - there are most of them...

 

[Kay7979]

I can't believe that Birmingham area is so good.
I have seem houses - way of out of town - a good hour (in traffic) from where most people work. well these houses were so overpriced for the area they were in - it is just plain silly but someone must be buying because every time I visit my friend - there are more of them...

Maybe not. Some builders are required to build homes on land they acquired, as terms of the loan on the land. Now they can only hope they sell. If not, they will have to keep reducing the price until they do, even if it means taking a big loss.

I often wonder if, now that people are starting to believe that higher energy costs are here to stay, developers will start building smaller energy efficient homes. The trend has been for "median" homes to become larger and larger in size, but that was over the last ten years when energy was still cheap. The figure used to be that the typical new house was about 1750 SF and it kept going up every year until last I knew it was around 2250. Maybe it's 2500 by now, as I haven't looked at the most recent numbers. Back in the 1940s, a typical house was 900 SF or so, and people managed to raise normal sized families in what would be to our modern thinking a very tiny house. I wouldn't want to go back to houses that small, but maybe the growing size of modern homes is another reason why people are so cash strapped today. A big house requires more in energy costs, maintenance, taxes and mortgages.

I remember back in the 1980s before I became an appraiser and was a real estate broker, big houses, especially big older homes, were not in favor. People didn't want to pay the heat and electricity for a huge house. You couldn't get a lot of people to even look at one. They preferred an attractive compact, more energy efficient home. And back in those days people with older homes that had high ceilings were using "suspended ceilings" (anyone remember those) to drop the ceiling height so it would take less to heat the rooms. We may see those days again, who knows.

 

[ducklite]

I know that there are plenty of things that builders can add to homes for a small cost to make them very energy efficient. The question is will consumers think long term enough to want to pay for them?

My DH drove our builder crazy with requests for energy efficient items. We added a radiant barrier on the roof, ceiling fans in almost every room and the lanai, a gas water heater and dryer. DH actually called Trane and spoke to one of their engineers about which would be a better choice--gas or electric for our heat pump. (The answer is electric in Florida.)

We've got just under 3000/sf under air, and have yet to see an electric bill of over $180 for the month--even in the hottest summer months. Gas is around $18 a month year round--that's the water heater, dryer, and BBQ--and half of that is just a fee to supply service, regardless of how much gas we do or do'nt use. Our lowest ceiling is 10', the highest is 14'.

Builders could put in convection ovens which cook faster. They could add better insulation and attic fans.

Unfortunately people don't want to spend the extra $5000 or so for these energy savers, and builders aren't required to add them, so it doesn't get done. Sadly the savings will usually pay off in five years or less, but consumers are too used to thinking short term instead of long term anymore. (There are sometimes tax credits for some of these things as well.)

BTW--Our ceiling fans keep the rooms much cooler, we don't run the A/C until it's about 82 out unless it's SUPER humid. We change/clean the filter monthly, that in itself is the single easiest and cheapest thing to do for energy efficiency, and most people don't bother. It takes three minutes and can be done by anyone with no tools needed.

Anne

 

[Kay1]

I have two CD's maturing in August and I'm seriously considering going solar. For a limited time we can get state and federal tax breaks so now would be the time.

For the person who's from Georgia and anyone who's interested in all this, Mish has another interesting article up today. He and Georgia real estate broker have had a good-natured debate on Motley Fool regarding the real estate market and the economy in general. The broker, who gave Mish permission to print all this, was a very firm believer in the strength of the economy and the real estate market. Suddenly, he and his firm really aren't making it at all.

It's called Lights out in Georgia: http://globaleconomicanalysis.blogspot.com/

 

[dvcgirl]

I have two CD's maturing in August and I'm seriously considering going solar. For a limited time we can get state and federal tax breaks so now would be the time.

For the person who's from Georgia and anyone who's interested in all this, Mish has another interesting article up today. He and Georgia real estate broker have had a good-natured debate on Motley Fool regarding the real estate market and the economy in general. The broker, who gave Mish permission to print all this, was a very firm believer in the strength of the economy and the real estate market. Suddenly, he and his firm really aren't making it at all.

It's called Lights out in Georgia: http://globaleconomicanalysis.blogspot.com/

That's an interest read...to see how the confidence of that realtor dropped. There are an awful lot of out of work realtors around these parts, and many more heading there....guarantee you. I know a realtor down here who unfortunately spent like crazy when the money was coming in, and boy was he rolling in it then. He got himself a brand new BMW, a new condo which he had furnished by a professional interior design firm, and a closet full of Tommy Bahama shirts. I got a "networking e-mail" from him the other day, and after a couple of times going back in forth he told me that he's living below the poverty level for this year. He hadn't "put anything away for a rainy day" and so now he's suffering...bigtime. The car is a lease he can't get out of....and he's now two months late on his mortgage payments.

The economy has really slowed, inflation up, consumer confidence is down as well.....all of this is out in the "daily reports" from the government today. I can sure see why consumer confidence is down....sure feels like we're heading for a recession.

 

[Cheshire Figment]

Within the last few days I read in the Sentinel that a year ago there were 6,000 homes in the area on the secondary market and about 30,000 people looking. Most homes had contracts within a few weeks of listing. Now there are about 18,000 houses on the secondary market and still about 3,000 looking, and it is taking 3-4 months to get contracts.

In addition to all the new construction within the last few years almost 17% of the rental units have converted to condo, where are all the buyers going to be coming from? If an investor cannot sell, they have to rent. And if they can't rent at a profit-making level they will have to rent at a losing level. And Service Industry people really can't afford the prices the investors want, so where are they going to get their tenants from?

When I bought my house 18 months ago the mortgage was just over 40% of the contract price. Since the base selling price of my model had gone up by over 25% in the 15 months between contract signing and closing, the mortgage was actually about 33% of the value at closing. Now the mortgages is under 25% of the value (and going down quickly).