Home prices show biggest drop - EVER!

[AndyA]

http://money.cnn.com/2007/02/15/real_estate/home_prices/index.htm?cnn=yes

The slump in home prices was both deeper and more widespread than ever in the fourth quarter, according to a trade group report Thursday. Year-over-year, it was the biggest drop on record, said the National Association of Realtors. But David Lereah, the group's chief economist indicated the worst may be over. "When we get the figures for this spring, I expect to see a discernable improvement in both sales and prices."

Now what was that you were saying about our "robust" economy, George?

Chrysler lays off 13,000. Ford and GM closing assembly plants, dumping workers. And now this. How can the economy possibly be good?

[MADem]

1. Well, they were being priced out of the range of most people

When there's no one who can buy, the prices naturally fall....

[AndyA]

3. In a Bush economy, credit drives the economy, and eventually credit dries up.

That is what is happening now. More to come, stay tuned...

[newsdude]

25. Honestly, I blame Bush for a lot of things

The credit economy isn't one of them.

And come to think of it, I ain't too happy with Clinton's free trade deal, either.

[WCGreen]

2. It is all related to interest rates....

People price their house purchase not on the end price but on how much they can afford in monthyly payments...

[Klukie]

4. Yes...

The adjustable rate mortgages are biting people in the wallet.

[WCGreen]

8. I have a few clients that are in trouble because they used

"creative" financing to purchase homes they shouldn't have been able to afford...

[SoCalDem]

20. In the "olden days", when BANKS were the primary lenders,

they used a strict formula.. 20% down (non-financeable.. you had to prove you did not borrow it) and the amount you ended up financing HAD to be within a percentage measurement of your income..(wife's income did not even count back then)..

Banks were in the business then of making sure you could afford to buy the house, and did not want you to default. They saw you as a long-term customer...not just a loan ready to sell the next month to the highest bidder..

[barb162]

37. It wasn't all that long ago

I think that was probably the smarter way to buy houses.

[Tatiana]

42. That's the best way to do it.

I financed through my bank, though I got many "O% down" financing offers. My lender did work with me, as I didn't have 20% to put down, but I had 15%, so I put 15% down and paid the remaining 5% in installment payments over 6 months (in addition to the mortgage payment).

I am SO glad I didn't fall for the 0% down or 10% down schemes, as some in my neighborhood did. I've been amazed at the number of homes up for sale due to foreclosure in my neighborhood. On my block alone (and an adjacent area) there have been 6 homes put on the market due to foreclosure. I know the former owners of 2 of these homes and they are both what I would consider young (30-ish), middle-class families with children.

I feel so bad for these people because they were first-time homebuyers who really purchased these houses in the middle of the so-called "housing boom." The asking prices for these homes now are $15-20,000 less than what they purchased the homes for originally. Now their kids have to be uprooted from their schools and their credit is shot because they feel for these creative financing schemes.

I rented for years. My advice is to rent until you have 15-20% of a home's asking price to put down and a mortgage payment comparable to what you are paying for rent. Otherwise, you are one health care or energy crisis away from not being able to afford your mortgage and losing your home.

[Mr. Ected]

6. Interest Rates are Still Incredibly Attractive

This had nothing to do with interest rates.  It had to do with
consumer confidence...or the total lack thereof.  As usual,
the facts are not on Chimpy's side.  Just empty rhetoric. 
Damn I hate that man.

[WCGreen]

7. They are but people are use to lower rates....

Interest rates have a lot to do with how people shop for homes...

[Mr. Ected]

10. High 5's and Low 6's Have Remained the Norm

The market DRIED UP the last quarter of 2006.  There was no
appreciable increase in interest rates during that period. 
The other poster had it right.  New housing was priced out of
the market.  Consumer confidence flagged.  And Hispanics hit
the panic button, thinking they were all about to be deported
by the Pukes.

[WCGreen]

12. The prices are high because interest rates were lower....

When the interest rates go up, the price of housing falls...

It's almost a direct correlation...

[Mr. Ected]

14. New Housing Starts Were Above Market

The builders became greedy, became accustomed to the interest
rate decreases, and built homes in price ranges beyond what
the market could bear. Lenders became greedy, introducing loan
programs that amounted to smoke and mirrors, with a noose as
the reward.  Gullible consumers gobbled it up.  Foreclosure
rates are now at 25% and worsening; historically, they're
around 7%.  Welcome to the Bush Economy, folks.

[barb162]

38. They're amazingly low...still

[Greyhound]

21. If you look at the overall history of interest rates in the USA, these

are indeed high. 2% - 3% were the norm until they started to climb in the 60's and peaked at the usurious rates of the early 80's.

There are several factors involved, but unreasonable expectations of profit are the primary driving force and coincided with the rampant corporatism that the raygun era brought.

Is it because those with capital have come to believe that they are owed a living, without effort, just because they have some assets?

[WCGreen]

23. And....

to not have to pay taxes on that money...

[wuushew]

5. boo...hooo... your poor little nest egg isn't worth anything

A house is a place to live not it should not be encouraged as investment vehicle. Never ending growth is pushing the destruction of the environment and the collapse of our civilization.

[slackmaster]

16. Mine could lose half its current market value and still be worth twice what I paid for it

The ups and downs of the market really have no effect on my personal finances.

My house is indeed a place to live. I never intended it as an investment.

[Bonhomme Richard]

9. Interesting the Gates Foundation dumped their building....

industry stocks.
They are not stupid people.

[dogday]

11. Bush Economics Practices Truthiness nt

[The Cleaner]

13. In the past I have SHOUTED About this Popping of the "Real Estate Bubble."

Unfortunately few believed me at the time. Few believed we were in a bubble, failing to see the clear signs. And now it's actually happening.

We were burned in 2000 trying to find a home in the DC area. High prices, insane overbidding, fierce competition. We quickly were priced out of the market for first time home buyers. It was then I realized we were in a bubble, only it took this long to show up.

It's like the tech bubble of the 1990s. You can't continue to have these dinky unprofitable startups seeing their stocks rise $10/day, many in the $150/share range and up. It's just not sustainable. Correction is imminent.

[Missy M]

19. A friend in California keeps me informed of the house prices there...

and it's unbelievable. 1.5, 2 and 3 million for a small 3 bedroom ranch house on not much land. That is in Southern CA in places like Newport Beach, Santa Barbara and such. It is totally insane. I don't know who can afford those prices because they are basically middle class houses. In my area, Western New York, 1 million will buy you a gorgeous mansion. How do people do it, I know not everyone in California makes the huge buck, so I can't imagine people being able to buy houses. When will it all stop.

[The Cleaner]

28. Believe me, that was the hugest enigma when we were looking in D.C.:

How the hell do people afford those prices? And how do they even get qualified to begin with? Because you figure, you have to be making well over $500K per year to afford it, and how many are at that level really? Who are all these rich folks?

One possible answer is investment brokers, who bought tons of houses in the "bubble cities." Thus the average joe is pushed out - I'm no broker, that's for sure. Thus I believe the brokers are largely to blame for the rise in housing prices.

[Missy M]

29. I don't know how they afford the prices....

on the real estate pages online it says something like $8,000.00/monthly payment. What are all those people who can afford that doing. It certainly isn't middle management, they don't make enough. Do that many people in DC or California make that kind of money. I find it hard to believe they do. If they do make that kind of money you would think they would want something other than a 3 bedroom, 2 bath ranch, although that is perfectly fine for me.

[cascadiance]

33. I came to San Diego from the Bay Area because of this 5 years ago...

... and thought I could afford a house down here. By the time I recovered enough from the hits I had from the Bay Area though, now it's too crazy down here too. I'm thinking of moving up north to Oregon, but that's probably got a limited time before it's too crazy too, unless we get a housing market crash soon! In any case, there's no way I'm buying into this market now down here unless we have an earthquake or something and I can pick up a "deal" on something being dumped afterward.

[dysfunctional press]

30. there is no one all-encompassing "bubble"...

there are regional issues to be sure-

but, for instance- here in chicago, prices are generally still going UP.

[fed-up]

44. thanks for being a shouter-I cashed out my equity in Nov-am now debt free

and loving it as I have health issues and am basically almost retired now

Lots of free time to work actively on political issues now :)

Thanks to all those that gave warning

I did manage to buy ahouse that was for sale by owner and got a great deal, while still getting close to top dollar for my old home

Foreclosures are twofold over last year and there is a $48? million ad campaign that the National Realtors Assn is doing to convince people they should still continue to buy real estate....

[The_Casual_Observer]

15. "worst may be over"

I doubt it.

[The Cleaner]

17. They ALWAYS say that. It's bullcrap that only serves to entrap unwary people.

And also serves to periodically pump up the market in a downward spiral, catching people off guard.

This always happens during market crashes too. They said it during the internet bubble. "Now's a great time to get in," they said, while stocks dropped. "Stocks are cheap! Get in while you can!" And then the floor drops out. Thanks alot people.

[The_Casual_Observer]

18. THis could go on for years, the borrowing power of the average joe

has been exhausted and more houses are coming on the market as the baby boomers retire without pensions or savings.

[sendero]

40. Me too..

... I don't know what kind of crystal ball this joker is looking in to, but I doubt very seriously that "the worst is over".

That's not the way "bubbles" pop. You don't get a couple quarters of downturn and then everyone lives happily ever after.

If I were looking to buy a house, I'd take my sweet time at this point, and I think that sentiment is widespread, essentially precluding the idea that "the worst is over".

[tom_paine]

22. The economy is NOT robust. Bushevik numbers are as false as Soviet numbers

It is as plain as that.

[Catchawave]

24. At least I'm stuck in a house I like.....

Great buyers market for you renters....bottom feeding is much more lucrative than flipping :evilgrin:

[WinkyDink]

26. It's about da*n time. The prices are still ridiculous. "Flip This House" slays me.

[leftofthedial]

27. "How can the economy possibly be good?"

because of the tax cuts for the wealthy, silly.

We need more of them, that's all.


now run along and buy buy buy!

[barb162]

39. The economy to Bush is the stock market only and that is doing

well. The job market is being transferred overseas. The house market will fail when people see all the jobs here drying up as they are doing now.

[Nimrod2005]

31. OUCH!

[Jackpine Radical]

32. It's only the low-end housing units that are losing value.

Hovels under 5 mil or so. None of Dick Cheney's property, nor anything in that price range, has lost value because the people that matter are doing quite well, and many of them are looking to move up the ladder a bit.

[girl gone mad]

36. Not true.

Andre Agassi recently had to sell one of his mansions at a loss. Oversupply has hit upper end housing, too. Unlike those tax cuts, I do think the negative effects of this slump will trickle down. Wealthy business owners and executives will look for even more ways to milk the company to make up for their paper losses, which means more outsourcing, etc.

Of course, a price decline isn't going to keep the wealthy from sending their kids to college or retiring and I have no doubt many will be eager to swoop in and buy foreclosed properties for pennies on the dollar in a few years.

[lonestarnot]

34. How did the markets close today? Last I heard they were up.

All the richies buy'n up all the stock to make it look good.

[BlackVelvet04]

35. Everybody bought houses 3 - 5 years ago when everything

was insane. We bought on the tail end of the feeding frenzy in our area and because I checked the internet everyday and the owner of the house we bought was in jail and needed a quick sale we got a deal compared to most everyone else I know who bought at that time.

Right now there are houses locally that have been on the market for over a year.

[roamer65]

45. Delete.

[Dukkha]

41. I just went on the market last month

I'm listing my condo at $10K less than it really should be. This huge freeze and constnt snow isn't helping either. I don't even care about making a big profit I just want out so I can get a home for my g/f and her kids.

[lonestarnot]

43. Didn't drop soon enough for my tax valuation. Bastards!

[roamer65]

46. It is most certainly not over yet.

Interest rates are still too high and prices will fall further. When Bernanke finally realizes it, he'll start to drop them and set off a nasty dollar crisis. Hyperinflation here we come.