Deflation?

[Steve Owen]

Homeowners also could be hurt by falling prices. Real estate prices have held up well across most of the country in the last few years, thanks to low interest rates that have boosted prices and let owners refinance mortgages at substantial savings. This happy scenario could change in a serious economic downturn, or, more likely, if a specific market becomes overbuilt with new homes. In Japan, many homeowners now owe more on their mortgages than their homes are worth.

Lately I've been seeing more and more of this kind of information/opinion. The article is, of course, simplistic, but troubling, all the same.

http://www.msnbc.com/news/803952.asp

 

[Terrel L. Shields]

Steve

You and I are in the same region, that Springfield, MO to Russellville, AR to Tulsa, OK triangle that is growing expotentially. I cannot see how the rate of increase can continue with the attendant increases in housing prices. Branson has already shown signs of a soft market after years of zooming interest rates.

In my local area we are seeing signs of overheating. Overpriced homes languishing and many many homeowners maxed out at low interest rates. They have no cushion. During low interest times is the idea time to pay down debt, to add that extra $100 a mo. against the principal that will shorten the payout by years. If you already have no equity and interest rates rise, if you are forced to refi, the only thing you can do is stretch the term to 30 or more years to keep the payment from rising substantially. Several local builders have defaulted. Those who manage to build the right size house in the right area are doing ok. But some of the builders think there is more profit in large homes have ended up holding them far longer than they want to. The only thing that is keeping my area afloat is 2.2% unemployment. If both husband and wife are not working, they cannot pay the mortgage. I would bet 7 of 10 bankruptcies in this area relate to divorce as one party or the other quits making a house payment (or half a house payment.)

ter

 

[Terrel L. Shields]

my spell checker works fine, my brain checker didn't. Branson has zooming inflation of property values not interest rates

 

[Farm Gal]

How bout the tax law that says that rolling over debt into a first mortgage refinance at a 30 year term is a tax deductable event? 8O 8O Whereby any astute or councilled individual is convinced that contimued refinancing is in their best finanaical interest?

Under curent law it IS just as long as the individuals don't spend the difference between old payment and new, and put it in long term savings instead.

I suspect Terr nailed the central and highly precarious nature of most household budgets: loss of one of the income streams for any of a number of reasons exclusive of poor planning such as personal illness, layoff, cutbacks, emotional issues, care of sick parents or children, or just plain bad luck, can cause a plethora of repos... I think many folks are too young to recall the RTC rolling through town after town selling off properties and shutting down banks businesses, and inadvertantly, entire towns.

I am becoming more and more convinced that a similar situation COULD occur in limited areas OR through entire sections of the country!

History does tend to repeat.

and people have very short memories.

and current laws, idiocies of so-called business efficiencies, and poor planning in high places seems to be herding us as a group towards a cliff I'd rather not see us jump over.

Bad day for report writing folks, too many medical and emotional issues on the part of homebuyers already upside down. Sorry for ranting my usual plaint. Last weeks realtor run statements about how its all roses locally does NOT match my personal observations. but it sure did interesting things for the prosepective refinancees around here :evil: .

 

[Dee Dee]

What a strange coincidence! :evil:
Now that the 12 mo. anniversary of 9/11 is days away, and higher priced comps can no longer be pulled during that period, more people "in the know" appear to be changing their optimistic mantras.
I've lost count of how many times over the past 8 months or so that I've been scoffed at and ridiculed by lenders, real estate brokers, investors and homeowners. I've been called everything from "Chicken Little" to a 'pessimistic appraiser' who 'doesn't understand the market'.
About a week ago one of our local news stations did a feature on the housing market in the Denver metro area. They said that there hasn't been this high of an inventory of homes for sale in two decades. That takes us back to the era when HUD had long lists of foreclosed properties for sale in the Denver Post.
There are fewer and fewer sales to use at all for comps, and what sales have occurred are full of seller concessions, longer days on the market and often sold significantly below the original listing prices.

 

[Dee Dee]

...and another thing! 8O :lol:
If I hear one more real estate salesperson tell me that, "this was an unusually low sale price because the seller simply had to sell immediately due to...(whatever)", I think I'm going to scream!
Just exactly when will they finally wake up and realize that this is the true current market value, now that EVERY seller seems to be in the same boat?

 

[George W Dodd]

This is a comment I've been waiting to use as part of my market forecast:

The market is experiencing a leveling of home prices after a period of rapid appreciation (a seller's market). The local economy is expected to slow down in the fourth quarter due in part to dropping consumer confidence; excessive State budget deficiency (1.5 billion) required spending cuts, hiring freezes, and layoffs; and the prolonged slump in the stock market which is expected to generate rapid layoffs as companies try to bolster stock prices by decreasing costs. This is supported by the rising inventory of homes on the market and inceasing marketing time from under three months to three to six months."

Any thoughts?

 

[Karl]

Great thread YES it is softening rapidly here Builder sold house for 118,500 in March 2002 EXACT same House Same Builder Same St 105,450 Closing this coming Wednesday.

 

[Dee Dee]

George,
We all know that your statement rings the truth, and it's very well worded, but you can bet that there will be some underwriter who will question wether you have the insight to predict what the economy will be in the fourth quarter of this year.
My experience has been that most only want to believe it if the loan will fly and the economic forecast is all blue skies.

Dee Dee

 

[Steve Owen]

Terrel, I don't work in Branson, but I know a guy who does. The way I know him is because he comes up to Joplin every time the Branson market crashes. It is very up and down and has been for years. First there's a boom, then a bust. It's noting like the rest of the area.

I think your market is similar, but a little different than mine. We have close to 5 percent unemployment, but a pretty diversified industrial base. Of course, like you, we are overly dependent on trucking.

The thing that I've noticed that is worrisome, is that no one wants to own anything anymore. As soon as they get 10 percent equity built up, they go out and re-fi to buy a new car. If Congress hadn't made the house the only deductible interest, maybe some of them would try to pay it off. Be careful out there, there's a lot of squirrley stuff going on these days.