Big downturn seen for some home markets

[Penndems]

Analysis of 379 metro areas forecasts double-digit declines for nearly 20 markets.

By Lex Haris, CNNMoney.com

NEW YORK (CNNMoney.com) -- The housing market will get worse before it gets better -- that's the finding of an analysis by Moody's Economy.com to be released Wednesday.

In the survey of 379 metro areas, the study's authors concluded that nearly 20 areas eventually could experience a "crash," or a decline of more than 10 percent from peak to trough. The most hard-hit areas will be in California, alongside the Southwest coast of Florida, and in Arizona and Nevada.

In addition to 30 areas already experiencing declines, the study predicts that 70 others will soon experience measurable declines, with drops extending into 2008 and even 2009.

<snip>

Those 100 areas represent nearly half of the country's housing stock. As a result, the authors write, "odds are high that national home prices will decline in 2007; the first decline in nominal national house prices since the Great Depression."

Story link: http://realestate.aol.com/article/_a/big-downturn-seen-for-some-home-markets/20061009125509990001

How the Top 100 markets will fare: http://money.cnn.com/2006/10/05/real_estate/moodys/index.htm?postversion=2006100611
********************************************************************
This does not sound good.

Our neighbors three doors down have had their townhouse on the market since March. They've lowered the price $25,000, had a handful of prospects walk through, but no serious offers. :( :scared:

[K8-EEE]

1. I feel sorry for people here (in L.A.) who cashed out equity

Cuz the home values here were getting RIDICULOUS!! Our little 2 br 1920 cottage in the valley was appraised at $575,000! If we would have bitten on all the "turn your house into cash" come-ons we got the last couple of years we would be in TROUBLE. I really think there's a financial tsunami coming to L.A. since so much of the "economic boom" was smoke, mirrors, and home equity loans. SO MANY PEOPLE are in mortgages they will not be able to afford once the "teaser" rates are done & they won't have the equity to refi.

[nashville_brook]

6. yes yes yes -- and -- this is an area where common sense

should reign. we don't need no stinking economists to magically foretell the future here -- it's a matter of seeing the ridiculous truth in front of you.

the smoke and mirrors economy is soon to become a giant land-grab.

[Penndems]

29. The two primary reasons housing prices in the D.C. area went through the

roof are (1) speculators, and (2) interest-only loans. The specs thought they could buy a property and either rent it out, or "flip" it and get more money. Those who took out interest-only loans - mostly young adult professionals - wanted to pay the interest and, when the principle came due, they'd cash out and reinvest in another McMansion or condo.

Well, guess what - now those speculators and "interest-only" folks are stuck paying the mortgages on two or three properties. The principle has come due on the interest-only loans, and they're paying through the nose.

Developers who had condo projects pending before area county zoning boards have withdrawn their proposals. Very few people here seem to be buying them.

My cousin's daughter had a house in western Loudoun County, Virginia, that she put on the market over a year ago for $900,000. After putting the property up for sale, she turned around and bought another million-dollar home. Can you image paying the mortgages on two high-end properties?

BTW, she's a real estate agent. ;)

[Nye Bevan]

2. "This does not sound good"

I disagree. There are too many people who cannot afford to buy houses at the current inflated prices. I would welcome a fall in prices of 30% or so which will enable many of these people to become homeowners.

And I am speaking as a homeowner myself. I have no plans to sell any time soon, and I have not foolishly borrowed up to the hilt using my home as collateral. So I don't really care if prices fall.

[nashville_brook]

4. yah, but if yer fer the little guy, remember how s/he will suffer

with the associated foreclosures.

[Nye Bevan]

8. A little guy who buys a house

and pays his mortgage on time, does *not* lose it to foreclosure simply because his home falls in value.

[nashville_brook]

11. social darwinism won't fly here

[Nye Bevan]

14. Oops, sorry. My bad.

My bank just called-- apparently they are foreclosing on my house because it has fallen in value by 20% over the last year.

Even though I have always been on time with my mortgage payments.

Excuse me- I need to go and pack.

[nashville_brook]

24. we're all glad you're OK financailly, but most DUers here

are also aware that a community is only as strong as it's weakest link. so enjoy your life of ease with money in the bank. myself, i worry about living in NEIGHBORHOODs that suffer as a whole. my financial situation is rock solid. no debt. period. woot for me. that isn't going to matter a whit if my neighborhood is full of foreclosures due to cash-outs, lost jobs, and economic blight.

but, by all means, enjoy your superior-ness and cast dispersions to those with less than you. it's quite flattering.

[pliftkl]

34. Why do dropping housing prices cause foreclosures?

"that isn't going to matter a whit if my neighborhood is full of foreclosures due to cash-outs, lost jobs, and economic blight."

I don't disagree that these are all risks based on the direction of the economy as a whole, but a drop in housing prices doesn't lead to any of these things. The drop in housing prices hurts people in expensive areas who need to sell and who are also under water on their mortgages. This has nothing to do with foreclosures or lost jobs.

In fact, I could argue that the reduced home costs will lead to fewer foreclosures, since the average debt load carried by new home buyers will be lower.

[nashville_brook]

37. i like you world... can i live there too?

[newyawker99]

48. Hi pliftkl!!

Welcome to DU!! :toast:

[nashville_brook]

27. oh, and... yaaaaaaaaaaaaaaawn.

[DaveJ]

50. I agree with you MathGuy

People complain about high home prices and then they complain about falling home prices. Can't have it both ways. These days it is nearly impossible for a young person to dream of owning a home in or near a city, except for those who are fortunate enough to have landed high level jobs, but not everyone can do that. I am a crazy idealist who think everyone should be able to afford a home, and do not think homes should be used as investment devices. Home prices skyrocket when they are bought and sold, and rented, over and over again until the price is inflated. Something as essential to life should be more highly regulated so that nobody should fear the day they may be on the streets because can't make their $1500+ payment.

[Penndems]

9. Agree with you Math Guy, up to a point

I live in the D.C. suburbs - Northern Virginia. AOL and other employers are laying off people left and right. The Federal Government is either slashing jobs, not filling positions or offering people early retirement (somebody's gotta pay for Junior's misadventures in Iraq and Afghanistan). Suddenly, we have folks who are putting their houses on the market for quick sale. Some of them get sold, but many of them remain on the market for quite a while.

Those whose haven't been downsized can afford to buy single-family homes, townhouses and condos at cut-rate prices. Unfortunately, if they do find themselves on the unemployment lines, those houses will go right back on the market.

[Greyhound]

15. I think the underlying problem is that those people you write about

will not have the $$ to get into a house with the lower prices as their incomes will take severe hits in the wide-spread economic turmoil that the housing crash will cause.
No, this will lead to another land grab like we saw in the 30's, with a very few families/corporations dramatically expanding their RE holdings while millions more will have no place to live. This, in turn, could result in several different scenarios, from a world-wide depression to wide-spread civil unrest, none of them good.

[Nye Bevan]

20. I bought a condo in 1991 for $183,000

that had fallen in value from $295,000 a couple of years earlier.

No way would I have been able to afford to pay $295,000. The 38% fall in value enabled me to become a homeowner.

And there was no widespread civil unrest. On the contrary this was the prelude to Bill Clinton being elected and probably the best economy in recent memory.

[nashville_brook]

25. 1991, huh... nice ROI from the roaring 80s. anyone care to

clue MathDud in on what happened in 1992 and for the next 8 years that might have affected his property value?

anyone care to tell him why the price of his lovely condo was inflated to 295K in the first place?

[Greyhound]

26. Different topic, we're talking about a general collapse of home prices

across the country, not isolated regional adjustments. Southern California, for example, had a pretty severe correction in 1990 - 1991 and many people that bought at the peak found themselves "upside-down" in their mortgages and it took 4 - 6 years to get their initial investment back.
The economy can absorb such isolated aberrations, but if it becomes ubiquitous it fuels a downward spiral, just like we saw in 1930 - 1934.
Another issue that hasn't been addressed is how these spikes and crashes can be virtually eliminated by returning the national economy to the model it was established on, but that's another thread.

[shanti]

33. i bought my small halfplex

in 1996 for 67,000, during CLINTON'S presidency. to buy it now, you'd need 225,000. i was 40 years old when i bought it too. there's no way i'd be able to afford to upgrade now and at my age...

[Penndems]

21. That's what I'm afraid of

AOL laid off 5,000 people a few months back. United Air Lines closed its Sterling, Virginia reservation center. The Federal Government is downsizing left and right. The only people making real money are defense contractors (big surprise, right?). As long as the Iraq and Afghanistan Wars grind on, they're gonna be on Easy Street.

You know what the irony is here, greyhound 1966? Up until recently, the Washington, D.C. Metro Area was insulated from downturns in the economy that affected the rest of the country. No so anymore.

[Greyhound]

32. True, no place is safe anymore, if there ever was any safety, it is gone.

There was a book released about 3 - 4 weeks ago that talks about how massive lay-offs have never slowed down and have morphed from a drastic one-time fix for a temporary market condition, to SOP all across the country. The corporations have broken the social contract with the people and the country that allowed them to come into existence, and the sheeple are still blind to it.

We can only hope that they will wake up before it is too late.

[Penndems]

38. Did you see the Labor Department's Job Creation Report that came out

recently? Fifty-one thousand jobs created nationwide. A lousy fifty-one thousand jobs.

Geez, I wish Bill Clinton was still President!

[Greyhound]

42. I wish my dog was President.

He will run on a campaign of expanding open greenbelts and extra bicuits for all.

[Penndems]

44. Hear, hear! Greyhound1966 for President!

You dog would certainly do an infinitely better job than the incumbent.

:D

[Greyhound]

49. Remember Tuesday the 7th of Nov. VOTE CYRYLL FOR PRESIDENT

He'll certainly be the best looking and most athletic one we've had. :rofl:

[Penndems]

51. "He'll certainly be the best looking and most athletic one we've had."

And, most definitely, the most obedient. ;)

[Greyhound]

52. Very obedient, and does more tricks than the arbusto monkey too...

this is getting weird, now I'm making mental lists of all the politiwhores that Cyryll would be better than... :crazy:

[DemocratSinceBirth]

16. A Decline Of 30% Would Be Catrastrophic Especially For Middle Class People

A lot of loans are arms or interest only loans...Folks were counting on the appreciation of the value of their homes to compensate for their rising mortgage payments... Under your scenario their homes would be worth a lot less than what they are paying for them. They would be upside down...

[Dorian Gray]

22. I'm sort of in the same boat...

I no longer have a mortgage on my apartment, and I think that a fall in the price will normalize things. I do feel badly, however, for all those people who were scammed into leveraging their homes, getting 100% mortgages, and allowing their debt to increase to insane amounts. The fall in prices will hurt them immensely.

[WorseBeforeBetter]

39. I don't feel badly for people who allowed themselves...

to be scammed or those who live beyond their means. Downsizings, medical issues, divorce, etc. are one thing, but borrowing to the hilt to live in a 5,000 sf McMansion is entirely another. Yes, mortgage lenders are out of control and government has failed to rein them in, but many Americans need to stop worrying about the Jones's and live within their means (radical, I know). Turning off some of those crap cable shows that fuel their spending addiction/need to consume might not be a bad idea either. I haven't looked at savings rates lately, but last I did, they were pretty grim. And who knows what will happen to Social Security.

[Greyhound]

47. SS is fine and the projected shortfall can be eliminated and the

whole system returned to solvency for as far as is reasonable to project, by simply removing the contribution cap.

The savings rate is negative.

People that live in high-priced low wage areas, like LA, have been forced to live on their equity, thanks to declining wages and corporate looting.

I so happy to hear that there are Democrats that have no sympathy for crime victims, it just fills me with such hope for the future. :eyes:

[shanti]

30. exactly

my sister and BIL live in southern cali, i live in northern cali. i own my own home (by myself), but they have been married for almost 10 years and have yet to be able to afford a home, and they both make good money and have low bills. i hope this will enable them to buy one, but for the others who used their house as a bank....dunno what to say. :shrug:

[Nye Bevan]

40. A fall in real estate prices is like a wealth tax on real estate

in which wealth is redistributed from real estate owners to first-time home buyers like your sister.

I would have thought that most progressives would be in favor of this. I certainly am, despite being one of the "taxed".

Of course there are some people who will find out that the phrase "unlocking your home's equity" actually means "borrowing money that has to be repaid".

Good luck to your sister and BIL in their search for a home.

[nashville_brook]

3. first nominal decline since the Great Depression!!!

"odds are high that national home prices will decline in 2007; the first decline in nominal national house prices since the Great Depression."

[A Brand New World]

5. It figures that this would be the worst housing market since

the Great Depression. We moved into a newer house in June before we sold our older house. It's still on the market, 5 months later. I know 5 months is not a whole lot of time but it is when you're making 2 house payments and not an end in sight. Luckily we LOVE our new house so that makes the whole situation a little more bearable.

[meganmonkey]

13. Good luck

We didn't even start looking for a new home until we had a solid offer on mistermonkey's house. It's a scary thought, paying 2 mortgages at once.

I wish you luck!

[Penndems]

23. Our neighbors two doors down are doing just that

They bought their brand-new, half-million-dollar townhouse back in February, thinking they could unload the old townhouse for megabucks in a matter of weeks.

Here it is, seven months later, and they're paying the mortgage on their former residence and on the $500,000 townhome.

[meganmonkey]

7. 2 of my old neighbors lost their homes

in the last couple months to foreclosure.

Both had their homes on the market for over a year. One of them lost his job locally and relocated to Seattle for work - his family stayed here until the house sold. It never did. Even though they dropped the price significantly.

It is a miracle that mistermonkey and I were able to sell his house when we did.

Scary.

:(

[Nye Bevan]

12. Not a miracle

The explanation is likely that you priced your house correctly, while your neighbors were greedy and held out for too much money.

[meganmonkey]

19. Actually, no

They dropped and dropped their price to where they were losing money (at least, the ones we know well - I don't know all the details of the other family). It was a sad, desperate situation. Believe me, the people were not greedy.

This happened in a small town in an economically depressed part of Michigan. Virtually no one is buying homes there. And there are tons for sale.

Regarding the use of 'miracle' - I will bring it down a level by saying we got really, really lucky - we met the right couple at the right time, through circumstances that had nothing to do with realty, who were looking for a house in our neighborhood with a big porch. At the time our house wasn't even listed (having tried and failed after 9 months, we were planning to take a break and then list it 'by owner'), so if we hadn't been introduced to these folks at that moment they would likely have picked a realtor soon after and never seen our house.

[Quakerfriend]

10. Within my own family, we just sold two houses and bought

another- all in the suburbs NW of Philly. One was a small rental house that had been somewhat neglected for ~ 15 yrs.- in a very 'hot' area- It sold in 4 months for 24% below the asking price. Another was a very special property, again in a hot area- sold in 9 months for $180K less than asking price- and ~25% below asking. Neither were over priced by any means.

The property we bought had been on the market for 50 days (total) and we got it for $170K below asking price. 26% below asking. It's in a very desirable area. But, I think it was overpriced. Needs quite a bit of work.

So, I'd say that the Philly area is showing a pretty steady 25% drop in value!

But, things are moving. Just not at lightning speed.

[Penndems]

17. You're very fortunate, Quakerfriend

Real estate in Philly Metro (and, for that matter, statewide) is red-hot.
Pennsylvania is one of the most affordable areas in the country.

Unfortunately, I live outside of D.C., and prices are expected to fall
12%, according to the chart I linked to. :(

Why do I feel as if this country's economy is in freefall?










(on edit: Change percentage from 13% to 12%. My bad. :( )

[DemocratSinceBirth]

18. I Live In Orlando-The Prediction Is The Housing Market Will Be Flat...

Thankfully...

[nashville_brook]

36. i have friends beachside who are already upsidedown

they bought beachside brevard county 'cause that's where we grew up. 80K in the late 90s bought you a decent 3/2 concrete block construction. then came divorces and hurricanes... insurance skyrocketed... many cashed-out just to fix roofs and get back to "normal."

the market peaked about 8 months ago there. if you didn't sell be then, you are upsidedown for as long as you can hold on. you aren't getting out from under it. it's going to be a long damn time before the market gets back to where it was in the days of 4.x% fixed mortgages.

so... the old neighborhood (north satellite beach) went thru a little resurgence. lots of riff-raff wandered off and middle-class folks moved in... only now... it's going into decline again. whoops.

it's not just the one homeowner who suffers when the housing market tanks... it's everyone who owns... especially those at the margins.

[DemocratSinceBirth]

41. I'm Inland...

It's hard to buy homes on the coasts because few if any insurors are writing policies...

[Penndems]

46. The prediction for central Florida seems to be optimistic

No so much so for the coastal areas, it would seem . . . :(

[jackster]

28. I think the Boston area is going to be worse than

MONEY has predicted - we have a glut of condos and apartments on the market - to buy and lease and many many more being built while sale prices are dropping, are slow, and fancy luxury apt complexes are offering all kinds of incentives and free rent.

It doesn't take a rocket scientist to do the math here especially in Mass where according to the last census we are losing people!

[DemocratSinceBirth]

31. That's The Saving Grace About Central Florida

People still want to come here and one thing they're not making is more land...

[Penndems]

35. Developers in the D.C. metro area have withdrawn their applications to

construct condominium complexes. They just aren't selling.

I'm not an economist, but one doesn't need to be one when you look around and see people getting laid off and homes not moving to know the economy's in bad shape.

[WorseBeforeBetter]

43. That's one of the reasons I was driven out of that area...

the $799K 2-bedroom condos being built in Alexandria. Who knows, maybe I should have stuck around and picked one up for a mere $399K. ;-)

[Penndems]

45. Oh my gosh - YES

Sheesh, talk about greed run amuck. A tricked-out apartment for $800K.

:P

[windbreeze]

53. an apt...costing $800K???

Wow...am I glad I live where I do...however, I keep wondering when that housing problem is going to hit here...they are building new homes everywhere there is a few acres with nothing on it...hundreds of them(it makes me sick to see all that previously open land covered in homes)...all going for $200-$300 and up...built so close to each other, that I don't see how anyone could have any privacy...

I never needed a big house...we have 1 1/4 acres with a double wide mobile home on it(that cost us $24,000 brand new in 83)..I am perfectly happy, it's a quite nice home...(we haven't allowed it to become trashy)...however, I have a divorced daughter, mother of 3, who is going to lose her home...seems dad doesn't think he should have to support his kids...and she can only work so many hours a week...what will we do??? I don't know...do I help her save it, when I think it was way overpriced when she bought it? Is there a chance any time soon that her circumstances will change? again I don't know...but we have both retired now..so our income is not what it was the other times she's needed help, and we now pay $600 for medical coverage every month..I just really don't know what to do...we also have a son (with kids) who has lost two good paying jobs in less than a year, due to a plant closure/and one layoff...the last time, he and 62 other people lost their jobs...and there are no jobs to replace them...terrible situation all round...I am more than a little scared and worried about what the future holds for us all...
windbreeze