Good post, if not debatable. I ask again though, how many other ETers are buying foreclosures? I've seen stuff in the Midwest go for 40% below appraisal value while needing very little turn-around refurbishing. Every market has options for making money. Where there is an exchange of money, there is a way to make money. And that's just it, banks just want their money back asap, and most realtors aren't interested in showing houses that will soon be put up on the chopping block, especially when they need new carpet, paint & minor drywall repairs. Plus, add in the number of quality homes on the market that aren't selling at the premiums wanted by home owners. In my opinion this housing market is just a new take on the old adage "Buy low..." Not to mention, buying a foreclosure for your personal home isn't a bad idea either. Especially considering that a fixed rate loan is still close to historic averages, and half of what it was in the 1980s. The current availability of quality foreclosed homes is exponentially larger than the norm, and probably will continue for at least the near future, but they won't be around forever...
Considering 30-40% drops are already in place in parts of CA, 50% would mean we're very near the bottom. So, big effing deal.
Exactly. It is now possible in certain area to pick up new construction below builder cost. I am interested to hear how the fundamentals will not support prices at that level.
we're not near the bottom; not in Cali anyway. Cali would be an importnant country, let alone state, so when Cali takes the pipe the impact will ripple through the country. we will be near the bottom when people are swearing off real estate and bragging about the benefits of renting over home ownership. i still think we could see foreign buyers ala Japanese c. 1988-1989 hit select markets such as Seattle, S.F., Vancouver B.C., etc.
They already are. And it depends on where you are in Cali. The outer edges of the desirable areas have already imploded and are being sold off at below cost to build. I believe those areas are near bottom. The "name brand" areas are still holding on, but I can't imagine they can hold on forever when you can get 3x the square footage for a lower price 20 minutes away.
. October 25, 2007 SouthAmerica: I knew that the new Bankruptcy law of 2005 was a bad deal for the US economy. Here it is just one of the unintended consequences of that fiasco. ******** Business Week â October 29, 2007 âBankruptcy Reform Bites Backâ For consumers, debt relief is harder to come by. And that's adding to housing woes By: Christopher Farrell Score one for the law of unintended consequences. In past periods of economic turbulence, American households were able to escape mountains of bad debtâand keep their homesâby declaring bankruptcy. During the weak growth years from 2001 to 2003, for example, nonbusiness bankruptcy petitions averaged roughly 1.5 million per year. Lenders complained bitterly that bankruptcy was too easy, but because financially stressed Americans could write off their credit card and other consumer debt, they had more money available to pay their mortgages. But today's growing problem in the housing market is differentâforeclosures are soaring, while bankruptcies, though clearly on the upswing, are running roughly at half the 2001-2003 pace. The reason: A new bankruptcy law, approved by Congress in 2005 after years of debate, makes it much harder for households to get out from under their consumer debt. The result: More people being forced to walk away from their homes, leaving lenders holding the bag. Perversely, a law intended to help the financial industry may be damaging the housing sector, creditors and borrowers alike. "It doesn't matter what you think of the purpose of the new bankruptcy law. The timing is bad," says Susan M. Wachter, professor of real estate at the Wharton School of Business. The old bankruptcy law, in effect since 1978, was considered extremely housing-friendly. Most distressed borrowers favored filing under Chapter 7, essentially cheap, quick debt liquidation. In practice, most got to keep their homes, while the rest of their property and assets were sold off to pay a portion of unsecured debts such as credit-card and medical bills. When the assets ran out, the remaining loans were cancelledâalthough some debts were off limits, like student loans and child support. Future paychecks could go to mortgage payments. By contrast, the new law was designed to protect creditors. For one thing, only low-income borrowers can file for Chapter 7, which wipes out debts. The amended law pushes more people into Chapter 13, which forces households to accept 3-5 year repayment plans on all debtsâsecured and unsecured. In other words, they're still trying to make payments on car, credit card, medical, and other bills that used to be discharged in Chapter 7. That makes meeting the mortgage more onerous. Filing for Chapter 13 temporarily halts foreclosure proceedings, but the protection only lasts as long as the borrower is making mortgage payments. But even low-income subprime borrowers aren't escaping the new law. In theory, Chapter 7 is still available, but the new law hiked the cost of going bankrupt in order to discourage the practice. Under the old law, the average cost of filing for Chapter 7 was about $800 to $1,400 in attorney and other fees, according to Henry J. Sommer, president of the National Association of Consumer Bankruptcy Attorneys. He estimates that the cost is now up to roughly $1,400 to $2,400. That's a hefty price tag. Another problem: Under current law, bankruptcy courts don't have the option of reducing the payments on the mortgage for a primary residence. That means anyone who took out a subprime loan is stuck, unless they want to walk away. "If you file for bankruptcy, you don't get relief on the mortgage," says Michelle J. White, an economist at the University of California at San Diego. Recent bills introduced in the House and Senate would allow judges to adjust unaffordable mortgages downward. That changeâif Congress wants to reopen the 2005 lawâcould transform bankruptcy into a more practical option when dealing with mortgage lenders. But at least for now, the impact of the 2005 law is to make the housing slump worse. And that means it could take a lot longer than many expect for the economy to regain its footing. Source: http://www.businessweek.com/magazine/content/07_44/b4056080.htm?chan=search .
Very interesting. Seems there's still a lot of denial about the real estate crash. Thus, a LOT more downside to come.