You have to look at what caused the housing bubble. Mortgages were really cheap, buyers had fistfulls of OPM, builder's wanted that OPM and built lots and lots of houses. Mortgages got even cheaper with ARMS and interest only loans and people did things like put nothing down on these lavish new homes on the assumption that the houses would continue appreciating at 10%. The problem was the builders overbuilt and then the ARMS started adjusting, then people started missing payments. I would be willing to bet if you factor out the ten worst markets things look much rosier. I know that is the case with foreclosures.
im sure youre right. i heard a few months ago that over half of the foreclosures were not primary residences---makes it seem much less significant. although even if home values dont go down in your area (dont seem to be dropping here) its still gonna be very hard to sell because the loans are harder to get
i agree with red that being responsible about what you can realistically afford is the key. i dont know if this fully pertains, but it kinda does.... in early 03 we bought a home in new orleans. at the time we bought, lakeview had the fasted rising property values in orleans parish. on paper, we could have afforded a lot more, but we bought a little 1940's house on a large lot. the fact that we really loved the area and this particular little house (a nice large lot) sealed that decision. our intent was to rent it out for a few years to pay the (15 year) mortgage, because our house here in oklahoma is almost paid off fully. then, we could use it as a second home since we are in nola/br so much, and maybe some day move back for good. we had even talked about paying half of it off by renting, then tearing down and building something bigger (tho not a mcmansion) after the okla house is completely paid off. between the equity of this house (probably around $250K), the property values in lakeview, and only one mortgage again, that would have been very doable, and not put us in a very big hole. now fast forward to 05 and that bitch called katrina. we have a house that is unlivable, has not had a renter in 2.5 years, and home values in the area that are more than in the dumps. we could sell the place as a tear down, but the hit we would take financially is not worth it. we are now in the process (just starting) of rebuilding. but because rebuilding prices have risen so much i am about 25k short of what i need just to rebuild the inside without doing anything fancy, and it will be the same little house, just nicer inside because everything will be updated. (and this is with getting 100% insurance.) we could have taken out a large loan against the ok house and done much more, but that is where the responsibility factor kicks in. instead, i am giving in areas and not doing what i would really like to do, to stay within a budget that is realistic to what we can afford, not what is shown on paper. it is not worth it to risk two houses to rebuild one. the reason we are lucky and even tho paying two mortgages has made the budget tight, we havent lost everything because we didnt bite off more than we could chew in the first place.
sure, but you werent forced to sell. my whole point is that if you have to sell, you can lose a lot of $$$, especially if you recently bought. nationally, a lot more than i would have expected and maybe more than what was lost during the Depression.
ok, i missed the part about forced to sell. such as relocating due to business. but i do still agree with red about the people that bought mcmansions they were only able to afford on paper in the first place.
When my husband and I built our first house as newlyweds in '00, we bought a 3/2/2 house with 1900 sq.ft. for $156,000. That was at the top of what we then could comfortable afford, though we were approved for around $250,000. That would've built a McMansion is the larger part of our subdivision at that time, but we wanted to, you know, furnish the place and still have money left to drive two cars and eat out. We would walk around our beautiful, brand-new neighborhood sometimes at night, and other people our age, who bought the 3500 sq. ft. homes would have their lights on, and we could see in their houses (because they didn't have blinds) and look at the lawn furniture that furnished their "formal areas." Our little house was completely furnished within six months of our moving into our house. Fast forward to last spring and timing truly being everything. Seven years and two daughters later, our house was too small for us, and instead of building a McMansion, which most people like us were still doing, we decided to buy an older house farther south in Plano. We were approved for up to $400,000, and I was willing to spend up to $250,000 on a house, but we bought an non-updated house for $225,000 (it is 4/2.5/2 with 2700 sq. ft.) and spent the modest, though nice, $30,000 we cleared on our old house to update the new one. We went all out with new carpet, new plumbing fixtures, granite countertops/travertine backsplash, fresh paint, and a new 10-ft privacy fence. If we were flipping the house, we could expect to put it on the market here for about $280,000. We'd, however, be stupid to try to flip a house in this market, so we're set in this house. I like the position we're in now because the house is big enough to stay in forever if we choose (and if we do, in about five years, we'll put in a pool and perhaps build an addition on top of the garage), or we can stay here 7-10 years, then sell like we did the first time. The market here is slow, too, but nice houses are still selling--if they're priced right. My husband and I are thrilled we decided to make a move last year, rather than this year, though. We sold our other house in 14 days last year, whereas, it probably would've sat this year.
"Spec" as in speculation. Folks like Carmela Soprano who buy a lot and build a luxury home to sell for a profit so that they can more property and more spec homes and get rich. Some of these entrepreneurs bit off more than they can chew and it's a bad business decision by them, not a personal tragedy of a citizen losing his homestead.
It's not black and white with housing...the 90k house wouldn't depreciate 25%. It's all relative. There are many subcategories within the housing market... Also, the national average depreciation/appreciation doesn't apply to all housing markets. Here in northwest Louisiana we're still seeing modest appreciation. Again, it's relative to where you live. B.R. isn't in too much trouble..nowhere in Louisiana is really. Texas is by far the best state right now..due to them never allowing their homeowners to overextend by implementing laws that governed how much equity they could tap into and when. The Nation's overall problems do impact us here but not as badly as many other places.
I have friends who purchased homes in California and Washington, DC in the 350K-475K range. (This sounds like a lot but doesn't get you as much as you think in those locales.) In several of these cases their homes increased in value (on paper) upwards to to 750K-800K range. With the market dropping some could currently sell for around 500K. Here's where I don't agree with them and don't believe there should be any bailouts. Buy a home for 400K... The market goes crazy and your house appraises for 800K... The market drops and you sell for 500K... You claim you lost 300K instead of making 100K Much of our current housing problem has resulted from greed. Many people wanted to get rich quick. Others went with an ARM instead of a fixed rate because they wanted more disposable income. We can't afford to have everyone on the street and have the industry collapse but wholesale bailouts are just wrong. We can't get bailed out if we lose at a casino, or our stocks drop, etc. and I don't see this as being that different.
