i think there will be more than a 8% decrease in the over inflated areas.once people start to default on these 0 down IO loans. the banks will get stuck with all these over inflated houses and have no choice but to sell it at a loss.
I think many factors enter into this. Age? Income? Stability of income, etc. We could pay off both our houses. Looking at the numbers, the opportunity costs involved & tax credits, it makes no sense. Our 15 year mortgage is about 4.5%. Even our CD''s are getting 4+%.
I guess I''d be curious what you''d think would cause a massive sell off of real estate. People who are predicting a nationwide collapse are ignoring what actually causes a collapse. Bubble''s don''t pop unless everyone tries to sell at the same time. Rates rising and mortgage forclosures? perhaps, but a 1/4 point increase means a 1000 dollar per year interest increase on a 400k home. Significant? yes. Will an extra 1k per year in expenses cause calamity? In my household, no way. if someone can''t handle a 1k per year increase in expenses they have no business being in that home, period.
So this week, I want to say on Tuesday, when I was driving into work, they had on the local radio news, that the DC market (just since you used that as the example) had drastically slowed and houses werent selling and blahblahblah and the analysts were all shocked. It had to be a pretty major drop for it to make the news in Chicago. I dont know all the details, but my bf who is still otu there confirmed that he was listening to that on the news that day too. I should''ve looked for an article, but I didnt think of it at the time.
of course not suddenly, the first 10% drop will be really quick and then it will drift down maybe 5% a year for several years to come. i'll give you an example: the houses around us that had asking price of 500K 6 months ago. the owner would get offers like 520K (20k over asking price). that same house today, the owner would be lucky to get offers of 480K (20k under asking price). there is a difference of 40K from it's high.
I understand that, it just seemed to suggest that houses in DC weren''t going for what they were askign for and sitting on the market for long periods of time now. I wasnt claiming it was crashing, I just thought it was interesting because people always talk of the DC area as being a pretty hot market. I don''t think DC has a normal market, I think it is cyclical based on the elections though.
5% a yr really isn't a big deal........it all depends on how many yrs of 5% drop.
Continuous 5% drops also isn''t a crash, nor is it that bad either. The market is basically correcting to it''s equilibrium point. The only downside is that people won''t be able to harness as much of their equity. At some point it will stabilize around a pricepoint people are willing to buy at. We''ve already seen that that pricepoint is fairly high, the only occurance that would make that change is something like an industry collapse like I mentioned earlier. Bubble''s don''t pop willy nilly.Date: 7/29/2005 3:48:34 AM
Author: Dancing Fire
5% a yr really isn''t a big deal........it all depends on how many yrs of 5% drop.
25% drop in one month?......impossible
Houses spend a couple months on market instead of a week......first sign of a market reversal.in a real hot market,houses would be sold, even before the for sale sign hits the front yard.
i don''t understandwhat''s wrong if the bubble burst? a young couple would able to buy a home at a much cheaper price and for those couples that are looking to upgrade their home would able to buy their dream home at a much cheaper price. so what''s wrong with that?
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