Why Home Prices Will Continue To Decline

Discussion in 'The Powder Keg' started by blueice, Sep 21, 2010.

  1. Never_Evil

    Never_Evil G&G Evangelist

    We are just getting into the meat and potatoes of the housing problems. How many homes were purchased in 2007 or early 2008 on a 5 year ARM, and will come to market price in about two years? For some, it will lower there payment due to the APR being 4.2% on average, but some may balloon up to double that and force more people out of their homes because they over spent themselves.

  2. SwedeSteve

    SwedeSteve Freedom Zealot Forum Contributor

    Yes indeed !! We are upstream of the main dilemma !!
  3. Chris

    Chris G&G Evangelist Staff Member Forum Contributor

    still cheaper for me to rent than buy.
  4. ChaZam

    ChaZam G&G Evangelist Forum Contributor

    That is precisely what happens when people spend decades getting further upside down on a string of real estate transactions. Can you believe it???? Democrats and republicans that you voted for and trusted put the laws in place that helped everyone do that.

    PS; They knew they could lure people into that trap with cheap credit.
  5. samuel

    samuel G&G Newbie

    ^^ Gotta agree with Chris,figure insurance,upkeep, and taxes and he is right.I did and I could have saved lots of money by selling and renting.
  6. CrazyIvan

    CrazyIvan G&G Enthusiast

    I will tell you. I have worked in the building design industry for a little over 15 years, with close knowledge of the home building industry.

    These homes built by Pulte, Richmond American, etc...

    Check these numbers:

    When it was big, say 1999...The cost to build one of their cookie cutter homes was maybe $189,000-$220,000. They would turn around and sell the same house for $450,000-$575,000.

    What is the markup on that? ...238%-261% ???

    It is basically the fault of a lot of selfish Americans getting into situations they couldn't afford, but I blame a lot of our housing market crash on the big home builders. They rocketed the imaginary home prices up through the ceiling, roof and out into space.

    A markup that would be more along the lines of reality is maybe 10%-15% over the cost of construction, making that $189,000 house worth maybe $210,000.

    Another thing these huge home builders did was create a flood of homes on the market. There are more houses than there are families to live in them. And, tack on top of that, the number of illegals retreating back to Mexico because a lot of them can't find work here, we are starting to see the urban areas fill up again, leaving all these big homes built in the last 12 years in the suburbs empty.

    My mom lives in the heart of Mexico here in Denver. Since I was in middle school, American's died or moved away from the neighborhood, and it was flooded with Hispanics. I am sure a few of them may have been legitemate, but no way all of them. The whole street except my mom's house and 1 other house had Mexican nationals living there. This is a 1/3 mile long street, and has probably 36 houses on that block. The rest were Mexican Nationals. Since the market crash, a lot of those houses have been vacated, sat empty for 2 to 5 years, taken over by some management company for the various banks and sold for discount prices. Now, there are more Americans moving back into that neighborhood. Still quite a few Mexican Nationals, but not nearly like it was.

    The bottom line is that the housing industry has been floating in the clouds with their ballooned up prices. You can't continue to mark something up so much for so long and not expect it to end badly. This is also the reason I have told people many times before the whole crash...I didn't want to get into a home purchase because of the markup for one and secondly, I couldn't see myself affording it in the long run.
    Last edited: Sep 21, 2010
  7. Palladin8

    Palladin8 G&G Evangelist

    You can't only blame the government on the housing market crash. The people that knowingly bought these homes that they couldn't afford are just as guilty. Not to mention all the jokers who took all their equity out of their homes and spent it on toys. When the piper came a callin they had over extended themselves and are losing everything. The sad thing is that it has screwed the rest of us who were not irresponsible. The value of my home keeps dropping as everyone around me are living beyond thier means by driving the luxury cars and suvs, taking lavish vacations, and buying boats and toys they can't afford. All these people are having the repo man come knocking on their doors and getting evection notices.
    They are just as guilty as the government and sad to say I do not feel the least bit sorry for them as they have brought it upon themselves.
  8. ChaZam

    ChaZam G&G Evangelist Forum Contributor

    The richest, smartest, and most powerful men and women in the world wilfully and knowingly put this all in motion. To successfully institute their NWO they have to upend the middle class in all the developed countries. The uber wealthy want all the privately owned land and this is how they intend to get it.

    It is easy for them with a few politicians in their pocket.
  9. Evil, the ARMs will crest next summer, but there remains millions of unsold homes most which are not even on the market.

    DITTOs, Chris.....

    The typical margins on entry level homes is 10 to 15%, as you stated, with high end homes margins reaching 33%...

    If the middle class is destroyed, it places the rich at the margin....
  10. 1st they defraud you in the sale. We sued them, and had our mortgage forgiven. 00.00
    2nd, they blow their money on risky stock swindles and get the govt to bail them out, with your money. We should of been in the streets, with tar and feathers.
    3rd, they intentionally destroy jobs and and take your house back for for foreclosure, ruining your credit, while they build apartments for you to start back over at a higher interest rate. Had enough? Elect Ron Paul, or be doomed to repeat the cycle again!

  11. This is true. But I like being able to have something of my own. But as they say, home is where you hang your hat.

    And sometimes I have to wonder if they're not trying to make it, or force everyone, everyone that isn't rich that is, to end up in an apartment or similar type of housing?

    It's sure be easier for them to round us up if they were to ever want to?

    Not saying this is going to happen. Just thinking out loud I guess. lol
  12. Never_Evil

    Never_Evil G&G Evangelist

    I hope I can dig out of my hole and get into position to purchase a place that has a few acres for cheap.

    On a side note, did anyone notice there were a few times that the Canadian dollar was worth more than the American dollar?
  13. CrazyIvan

    CrazyIvan G&G Enthusiast

    I worked for Borm Engineers which provided the structural design for companies like Pulte, Richmond American, etc...

    This was not a news story I read. We had personal knowledge of their budgets and their market prices back at that time. You don't want to believe me? Fine.

    I am in Denver, and while I can not speak for the rest of the country, it was happening here with the large home builders selling their homes at extremely marked-up prices over the cost of construction.
  14. dhermesc

    dhermesc G&G Evangelist

    I agree, we have not seen the bottom of this market yet. The differance I see though is INTEREST RATES in general -not just ARMs. When the Fed adjusts interest rates to counter inflation expect mortgage rates to increase.

    The differance between a 4.75% loan and a 8.0% $150,000 loan on a 30 year mortgage is $318 a month ($1100 vs $782 monthly payment). If you can only afford the $782 monthly payment the most house you can afford is $107,000. Essentually the same house that was worth $150,000 at 4.75% is only worth $107,000 when interest rates are at 8%. Even without a recession or any other economic down turn interest rates rising to a level they were for most of the 1970s and 1980s and early 1990s will result in homes easily losing almost 30% of their value.

    Couple a recession with rising interest rates and a 30% decline is very optimistic. And if you think interest rates can rise without invoking a massive recession you obviously didn't live though the early 1980s. And if you don't think interest rates aren't going to rise you haven't been paying attention to the economic news for the last 10years.

    The only reason we haven't seen it is the dollar has been artificially strong since Reagan was president. The strong dollar has meant cheap imports which has actually made many consumer goods cheaper than they were 10-20 years ago. Look at TVs, washing machines and most cloths, all have been stagnant in price since the early 1990s. Other electronic goods such as computers, stereos, etc... are all cheaper or a LOT cheaper than the early 1990s. While goods made in the US have steadily increased in price (cars and houses).

    The dollar has enjoyed being the "world currency" for almost 30 years. At times its only retained its value because "what else is there"? A few years ago the Euro started to make a run at it but Europe's economic policies ruined it. Now that the US has adopted an economic policy even more disasterous than that of Europe. Expect confidence in the dollar to continue to fall. All it takes is China to say "No" at a treasury auction and the dollar will fall like a rock, picture a Weimar Republic type collapse. The "financial crisis" during the fall of 2008 was nothing. It was a political ploy to pass a massive spending bill that would save the US banking system by buying troubled assets. Except it never bought a single trouble asset (so much for the predictions) but was instead a method to nationalize the biggest financial institutions and manufacturing industries in US.
    Last edited: Sep 28, 2010
  15. Cyrano

    Cyrano Resident Curmudgeon Forum Contributor

    New York
    If you want something to worry about, worry about this: the same thing that happened in the residential housing market also happened in the commercial real estate market. When the commercial market collapses, the toxic debt from that is going to make the toxic debt from the home mortgages look like a molehill next to a mountain.

    I wonder if the commercial real estate lenders and realty groups are expecting the yankee gummint to bail them out the way they did Wall Street and the big banks because they think they're "too big to fail?"
  16. Dragunov

    Dragunov G&G Evangelist

    The problem is that you don't own it. Either the bank does, or the gummint does. Don't believe me? If your house is paid for, try not paying your taxes for a couple years and Unkey Sam will show you who really owns it!
  17. dhermesc

    dhermesc G&G Evangelist

    That's been predicted for a while but I doubt it will happen unless commercial realestate prices drop substantially. The differance is commercial loans actually adhered to traditionally accepted lending pracitices, usually a significant down payment and a realistic plan to pay back the loan with underwriting on the borrower's loan application. All of wich were missing unitl recently in the housing industry.
  18. danf6975

    danf6975 G&G Newbie

    keep in mind that depending on the area the bottom out times vary.
    for instance the area im in the more than 7 different agents i have talked to say for this area we are looking at a reversal in about 6-8 months but in some areas they are thinking 5 years or so and all of the people i have talked to where individual not associated so i got their personal opinions based on what they have seen ( just for this limited little area.)

    im just waiting to find that perfect property to use my VA on , myself
  19. After the real estate market falls full cycle the gov will use the banks to take the land and try to back the dollar with everyone's land like the Weimar republic.