housing market ready to bust?

[Guest]

Sometimes running a biz can be like living in a cave, i get so absorbed in the day to day.
  So I did some looking around last night and found the following opinions (and maybe some facts)
  There is a huge oversupply of homes on the market, and the largest unsold inventory of new homes ever.
 There is a slowdown in a lot of the "boom" areas.  
  32 percent of home buyers have ARM's.
 The inflation rate is higher than predicted and the Fed may raise rates again.
 $1 out of every $3 in the Phenix area comes from building related industies.
  There is a ton more but the gist is that a lot of people are predicting the cooling off of the housing bubble is going to be more akin to diving out of the sauna into snow than taking a lukewarm shower.

[Guest]

Having inadvertantly posted before i was ready, let me finish the thought--
    So the question is , if the housing market crashs,f it happens, what do I do? Our biz is directly related to home construction, although it is a very select high end market.
Having lived here for many years, we have a lot of equity in our place, but that may or may not buy any sympathy from the bank. I suspect NOT.  
  Any thoughts on this subject?  My thought was to sell now, pick up the apprciation, rent a place and wait for the balloon to burst and then go buy at the bottom.- but it is a risky and difficult effort and the love of my life says no way.

[TarpleyG]

It has already "busted" IMHO.

We put our house in Florida on the market in late February for $20K to $30K less than we could have listed it for in late 2005.  Our realtor showed us all the numbers and opined that we should go ahead and list even though we weren't truly ready.  We had an offer for asking price 3 weeks later and it came in while we were pondering a couple of other offers that would have cost us another $10K to $15K.  These people just wanted that house and didn't want to dicker.  We got lucky.

I have friends and acquaintences that cannot sell their houses/condos at all without the risk of losing some money.  The number of houses sold in April was down 30% in south Florida and those that are selling are selling for way under what the original asking price was.

I think that a whole bunch of folks that got sucked in to the ARMs are about to find out exactly how raw of a deal they can be.  We had a 3/27 ARM and got out of it just before the 3 year mark.  We knew we wouldn't be staying in that house for much over 3 years when we bought it.

On the other hand, here in the Raleigh area, in towns like Apex, it is very much a seller's market.  We looked at one house and made an offer.  They had 4 other offers on the table the same weekend and had shown the house 27 times in 4 days.  Needless to say, we didn't get that one.  I decided Apex was too booming for us since we were looking to get away from the crowd.  We opted to look a little farther out and I am glad we did.  I like the houlse and neighborhood much better than anything we looked at closer in.

Greg

[TarpleyG]

Just saw your appended post...

You might want to sell now like you are thinking...at least if Phoenix is anything like south Florida is now.

Greg

[K Frame]

The housing market has always been, and always will be, highly regional.

I think it was something of a generational fluke that most of the country was in a hot housing market for the last couple of years.

Some areas of the country are cooling off, others are remaining strong, just not going up as much as they were.

I think saying the market is ready to "bust" is a misnomer. Calm down, or mellow out, or simply coming back to a sembelence of reality are better descriptions.

[roo_ster]

Having lived here for many years, we have a lot of equity in our place, but that may or may not buy any sympathy from the bank. I suspect NOT.

I would think that they would be quicker to foreclose if you have a lot of equity.  

In the few years my folks have owned their house in FL, similar houses hve gone up A LOT...think 75%.  Thye have no incentive to sell now, however, since if they buy again in FL, all they owuld get is a doubling of prop taxes.

[The Rabbi]

Certain regions are already into the early bust mode.  I think Phoenix may be one of them.  Only way to tell is to check listings, see how long things are staying on the market, see what they are actually selling for vs. asking.

That said, if you like your house and can afford to keep it, then dont sell.  I would:
1) Strengthen my balance sheet.
2) Build cash where I could
3) Close out risky or speculative positions.
4) Cut life-style costs where I could comfortably.

Well established strong companies like downturns.  It shakes out the competition.  It makes it easier to position yourself for the upturn, making skilled workers, real estate, and supplies cheap to acquire.  
You are not specific about what you do, but in the very high end of the market it is a lot less cyclical, since the wealthy are less affected by economic changes.

[280plus]

I can tell you here in CT speculative houses are having a hard time getting sold. I think I'd just hang onto what I have and if the bottom does come use the equity to buy an investment property. Then when things trend back up sell off the investment. That way you wouldn't have to go upsetting your whole life (and/or wife ) by having to move.

Just my $0.02 of course

[Guest]

Yeah, I remember in the 80's seeing these unfinished huge homes out on top of John Tom Hill , on the road from Glastonbury to Hebron.  Tarpaper flapping in the wind. Speculators caught overextended I guess.

[280plus]

Yep. I've seen some horror stories in my day. These guys boorow from the next house to finish the last house until it eventually all comes crashing down. And if there are buyers they get caught in the lurch. Sometimes bad. Hell, I can remember 1965-67 I was like 10-12. We moved into a new house in a development in Naugatuck and for years there were 3 unfinished foundations across the street. We used to play in them. And get our asses whupped for it.

I went there recently, the place is really showing it's age.

[peteinct]

Here in CT the housing market  isn't busting fast enough for me. There are 32 new house 500 yrds from me and they are cutting a road in behand me to put in at least 3 more. There is a plan for a development on the far end of my street. It is going through the towns rubberstamp approval process. 100+ more houses.  I moved to east hampton  10 yrs ago to live in a more rural setting. I don't blame people for wanting to live here or landowners for wanting to make some money but I don't know how to keep the same rural/exurban life without moving to a new state such as Tenn. or WV.  and I can't do that now.  

As an aside 280+ do you want to meet and do some shooting? PM on the high road if you want to. I'm going to PM 3rd rail also.
pete

[Art Eatman]

I"m with Mike:  It's not at all a nationwide thing.  Some areas are in trouble, like SE Florida around Miami, or the  high-$ areas on the west side of Florida.  San Diego has been in a slight decline for a good while.  I've read that the Denver area has had layoffs in home-construction crews.

Some of the nationwide corporations that do subdivisions are pulling in their horns, and some of the home-loan people are laying off staff.

Colorado Springs is booming, and I'm told another 40,000 troops are going to be stationed at Fort Carson.  That means both investment opportunity and many jobs in the support infrastructure.

Art

[Guest]

Peteinct-- so is Willie O neals tavern still there in East Hampton? Used to be my favorite watering hole when I was riding dirt bikes in the state forest. Actually worked in E Hampton, at a little boatbuilding shop.called Able Shipwright. I am sure they are long gone now.
 Last time I was in CT was a couple of years ago, they were busy blasting and hammering driveways thru granite ledge to get to new home sites. Guess all the easy access ones were built on allready.

[Art Eatman]

Just ran across this tidbit:

Chron.com is reporting, "Foreclosures Rising With Debt, Job Losses":
 
"Nationally, foreclosures are up 38%, higher than in any quarter of last year, property tracker RealtyTrac said.

"The numbers are even grimmer in the Midwest. Michigan and Ohio, battered by automotive-related job losses, together recorded 45,000 mortgages entering some stage of foreclosure in the first quarter. Those are increases of 91% and 39%, respectively, compared with last year's fourth quarter.

"There are many reasons for the growing number of defaults, and there are suggestions that the foreclosure trend may soon worsen.

"Layoffs because of corporate downsizings, health care issues, increasing debt levels, and rising interest rates all are factors. In addition, a growing number of homeowners is relying on adjustable-rate mortgages, catching some people by surprise when their monthly payment rises."


Art

[Brad Johnson]

Like some have said, housing markets trends tend to be very geographically specific. Some places may be sucking air while other places are busting at the seams.

Here in Lubbock we're pretty lucky that our market is still trotting along nicely. The closed volume has continued a slow but steady growth. Our total listing-to-closed-unit ratios have gone bazonkers lately which will probably cause market prices to stagnate for the next year or two, but all the trends show the volume to remain steady.

Unfortunately beginning to see a trend of foreclosures here on a specific group of homes - the new construction, zero down, 50-60% debt-to-income ratio homes from 2-4 years ago. People would get into a zero-down mortgage with insane d-to-i ratios just because the house was new and the morgage company told them they could qualify. Never mind what they could actually afford. And the qualification was based on two incomes. Throw in a new baby, an injury, or even a short layoff for one spouse or the other, and your "one paycheck away from bankruptcy" scenario becomes all too real. I see at least one or two a week. They usually get snapped up by investors pretty quick.

Thankfully, we have very few repos from the high-end homes, even though the ARM and interest-only mortgages are as prevalent here as anywhere else. However, there exists the potential for severe problems should we have more than one year of bad cotton or peanut crops (60-70% of our local economy is directly tied to area agriculture).

Brad

[Otherguy Overby]

In southern California, the media have brought Real Estate to a dead stop.  Normally, this is prime time of the year for sales and moving.  The normal intent is for people to get sales closed and moving done before school starts in the fall.

People need housing where the work is and where people want to live.  The media "know-it-alls" butt in with doom and gloom, or boom and bust stories which people read and believe.  Real estate statistics are cyclical:  Slow around Christmas and fast at the beginning of the summer.  So, media pundits can say sales are off by looking at closings compiled prior to May which give false, easily misleading, or no information.  Sales are ALWAYS slow in December which means closings a month or two later are-also down, thus leading to statistics later compiled which leads media "know-it-alls" to then conclude a month or two later that the market is either good or bad and write articles about it.  When lemmings read these articles, the prophecy becomes self fulfilling.

So, the next time you read an article about Real Estate in main stream media, please do take it with the proverbial grain of salt.  After all they ARE the only ones "professional enough" to tell us how things really are.

[peteinct]

Tokugawa, yes the tavern is now called Governors place or something like that. He isn't the owner anymore. the town is growing by leaps and bounds. I think there are over 15000 here. One neat thing I heard about the Governor. When he had a dog it automatically got the towns #1 dog liscence.
pete

[280plus]

If you're talking about Rowland the license plate on his limo was like 0001 too! No ego there...