Housing & Economic Collapse - In Progress

PolestaR · Light Sweet Crude Joined: Jun 21, 2005 Posts: 1047

On the 6 o clock news last night they talked about people camping out for 10+ days at a real estate agent hoping to be first in line to buy some land at a new sub development. The title of the story was BOOMTOWN, and they put on about 6 different real estate people saying how we were going to have at least 15% growth this year. The funny thing was they were like licking their lips when they were saying it, with this sort of desperate look on their faces.

Locally the average house price here now exceeds what 2 average waged (40000/year * 2) people alone can afford together on a loan. For some reason no one seems to care too much about this. Why doesn't anyone understand that if real estate prices exceed wage increases for X amount of years (especially at 15-20%) then no one except people already with houses or the above average wealthy will be able to buy them. No one seems to get this... how dumb are people. This should be ringing alarm bells in peoples ears, as soon as the majority of people cannot enter the market, the gap between rich and poor drifts even further (possibly leading to inequality riots, etc) OR the market will crash because of too few buyers.

Vexed · Heavy Crude Joined: Aug 13, 2004 Posts: 461

Personal opinion from a U.S. West Coaster:

1) 3 years ago I almost bought a house for $195,000. Due to a minor problem revealed after a home inspection, I decided not to purchase. The home JUST sold for $380,000.

2) There are homes going up on all sides of me. The average price is $500,000. I have watched many of them built in under 3 months. Plywood stapled to 2x4's. No yard front or back. Classic McMansions. And they are still filling up fast.

3) Mediocre residential properties are going for more than solid income producing commercial properties.

Housing slump, my ass. (At least on the West Coast.)

Is that kind of increase sustainable? Nope.

Do I see it slowing down right now? Nope.

This is why I am increasingly worried that it will be a bang, a big bang, not a whimper when the bubble pops.

donshan

PolestaR · Light Sweet Crude Joined: Jun 21, 2005 Posts: 1047

Tyler_JC

I live in a 4 bedroom, three bathroom, Cape house in suburban Massachusetts. 20 miles south of Boston. The house is maybe 2600 sqft. excluding the unattached garage.

Value? 500,000 bucks!

How did that happen?

My town is nice neighborhood with a great school system, and there are possibly hundreds of houses for sale. There are only about 10,000 people in the town. And somehow every street has a couple of "For Sale" signs on it.

Either the turnover rate is astronomical and people are moving into suburban Mass by the bus full, or the market is tanking in front of my very eyes.

A friend of mine purchased a fixer-upper a few doors down from where he lives. He is attempting to turn it into a McMansion and sell it. But so far, no takers. If this doesn't work out for him...it could be bad. Real bad.

It is definitely a buyer's market right now. Prices are eroding and people are panicing. The school is having financial difficulties because prices aren't going up fast enough and thus property taxes have stalled and according to some, falling!

This could very well be the beginning of the end.
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mekrob · Expert Joined: Dec 09, 2005 Posts: 2664

I hate to say it, but from a personal standpoint, this is pretty good news. My parents have been renting for a while and are about to move to a much smaller house now that me and my sis's have been going to college and moving out. They'll start looking soon, so even a slowdown now would save them thousands, although I'm not quite sure of the market in rural NC.

Tyler_JC

I doubt the rural North Caroline market will see much of an impact from a housing crash.

Only the most over-heated markets see massive declines. California, NYC, DC, Florida, Boston, etc. will see big prices declines but much of the rest of the country may be mostly unaffected. Ohio never had a housing bubble. Nor did Oklahoma or Mississippi. So it's not a universal experience.

But the places that have very overpriced real estate will be hurting in the near future. They may be hurting as it is right now.
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loghomebuilder · Tar Sands Joined: Mar 12, 2006 Posts: 26

" IMHO the objective of buying a house is to find housing suitable for needs and budget, pay at least 20% down, and make double principal payments with the objective of owning the property free and clear ASAP.
Owning a home with NO mortgage produces a wonderful atmosphere of freedom. Let the storms of housing bubbles, layoffs, and peak oil come. If you don't have to meet a mortgage payment you are FREE each month to decide yourself how to spend available income. You will have options when others have none. "

I am a first time poster here. so not sure how to get someone's comments clearly identified. Anyway. regarding the "freedom" each month to decide how to spend your available income. I am one of those "free" to decide to spend. My wife and I own a beautiful large victorian house in the midwest. But with taxes at about $1800 a month, then insurance running about the same (pretty good coverage) that right there works out to $300 a month before we even get out of bed in the morning. We recently have been looking at buying a 150 acre ranch in southern MO. Taxes. Less than $175 a year!!! And we don't even want to talk about the cost to heat our house with Natural gas. Our bill in december was over $750. Needless to say we turned our heat down considerably and then even lower at night. We managed to get that down by more than half for the remainder of the winter. So, my point. Even if you have your house paid for. If you are depening on city water, sewer, heating with natural gas (oh and this $750 bill was during an exceedingly mild winter. I can't even imagine how high that might have gotten if we had had a brutal winter ???? And if so would prices have spiked even higher. If so would I have been looking at $1000 or $1500 for the same period of time???? Time to get out of dodge. Live a more simple life. Heat with wood. Learn to use efficient appliances than use a fraction of the power. Grow our own food......

drew

Dukat_Reloaded · Light Sweet Crude Joined: Jul 31, 2005 Posts: 1004

Hi loghomebuilder, It's great to see your post here because there is a definate illusion that buying a house creates personal security. If I personally owned a house right now I would be concerned, because typically a house is a persons/families greatest asset and the persons/familes greatest asset in alot of cases is highly leveraged in debt. I would be concerned too on the flip side if a person/family owned 500k worth of gold or silver leveraged on a 50k deposit at 5% interest and they rented instead (atleast they would not pay property taxes, rates etc etc). For some reason there is an illusion out there that if your able to get a homeloan and secure a house, your safe and your property will increase every year making it a win win situation. I believe this will not go on for much longer and even people who own their homes outrite should think about selling and renting and choose a different asset class to invest in. If your house is your greatest asset and it's appreation has increased so much and it looks like it's topping out and going to the downside, why not sell your greatest asset at it's height and buy into the assets which in afew years time property speculators will be selling and buying alternative assets away from property. I will tell you right now, I would feel safer renting and owning 500k worth of gold, than own a 500k property and live there and have to pay all the rates. Atleast your free, owning property ties you down into a certain community and it's very expensive to sell out and move. Honesty I believe people who seek property ownership are personally insecure, and I don't mean the people who can afford property, the people who can't and the banks take advantage of them convincing them that they can pay off the loan in 30 years while the man and the woman both work double shifts and they end up paying the banks twice as much as what the loan was orginally for.

If you bought a house in 1980 for 50k which was the going rate of houses in 1980, today your house would be worth 500k, but will the house you buy today for 500k be worth 5million in 25 years time? (simple calculation, 50x10 = 500, 500x10 = 5 million). Yes there has been alot of asset inflation and it might continue but I wouldn't bet on it. Property might keep going up or it might not, and if property does not go up in the future, it will be a very bad investment, one which might shape your entire life.
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Revi · Fusion Joined: Apr 25, 2005 Posts: 3024 Location: Maine

I am a real estate sales agent and just got in the business. I hope it doesn't tank too quickly. I don't think the kind of real estate I want to sell will go down. Green houses with things like passive and active solar, woodlots and other useful rural land shouldn't go down much, or at all. Woe to those who purchased a McMansion. Those things should lose value. Who can heat them? I think the ideal house be an earth-bermed solar house with a natural spring.

ararboin · Heavy Crude Joined: Oct 12, 2004 Posts: 238

Revi · Fusion Joined: Apr 25, 2005 Posts: 3024 Location: Maine

People may be burning their McMansions in construction to try to get out from under them. There was a story in today's Morning Sentinel about a $300,000 home that was under construction in Wilton, Maine. Apparently a trained labrador many have whiffed something odd. They are going to examine some stuff at the state crime lab in Augusta.

If you have an adjustable rate mortgage you may be so desperate that you try to get out of what you have committed to before you even move in. I think it's a bad strategy, but people are getting desperate.