You have a choice, answer my question or admit you're wrong. If these people are so innocent and reasonable, don't you think they should have known rates were going to go back up? Did ANYONE expect rates to stay at a 50 YEAR LOW? All they would have had to do is ask their banker what the payment would be if the rates returned to their recent previous levels. Everyone knew the rates were going to go back up, yet people bought no money down 30 year and interest only mortgages anyway.
Wrong about what man? OK I'm wrong, now answer this! Why is there a national real estate bust going on RIGHT NOW after such a supercharged market of the last few years
OK, so that is why the real estate market is in a free fall, because stupid people signed bad adjustable rate mortgages Is that the entire reason, is that the only reason
Is this guy for real or does he do it to annoy people? My god, I've never met anyone dumber in my life.
I tend towards annoy, personally. He's more on his game with geopolitics, where Nixon is obviously to blame for everything
YES People bought houses with adjustable mortgages at 50 year lows, now the rates are returning to normal levels and they cannot make the payments. Large large amounts of people, especially on the west coast, took out interest only mortgages, which are being readjusted this Jan, and the payments went up significantly. I've read in some places up to 25% of all new mortgages were "exotic" mortgages (interest only). That is the SOLE reason. That is a FACT. Read up on it. Do you really think 30% annual return for real estate we saw 2 years ago was sustainable?
I've gained about 50% on my house in 2 years. Not that I'm not happy, but I certainly wouldn't buy my house for 50% more than what i paid for it. Market needs a breather. I'm surprised it took so long, actually. Especially when I can buy a bigger house than mine down the road for 20% less than my original buying price. The prices are really messed up right now. Over building and under selling non-new homes.
Good response Polo, great post for sure! Condos here in Florida right on the ocean just quit selling about 6 months ago, the buyers just quit buying them, now we have a glut of concrete towers and thousands of unsold units on the market. Developers even stopped projects mid stream and construction activity in some cases stopped on unfinished buildings it is so bad at the moment, it went from white hot to cold. That is just a bad economy, it has little to do with the type of mortgages out there!
I've read that in places like Las Vegas and Florida, up to 35% of condo sales were done as speculative investments. THAT's why condos are not selling. Interests are back up and these idiots who thought they could make a quick buck before by buying a condo and later reselling it are no longer doing it. It has nothing to do with the economy.
Keep in mind that it is existing homes sales that are sliding. New home sales are still up. With interest rates this low, had I not bought my house before they dropped, I would have built instead of buying used..
Yeah, the market was so hot that investors were flipping them since the units were appreciating so fast, but the buyers quit showing up and many got left holding a hot potato! Now there are more units available than buyers!
Man I knew that was going to happen before anyone, it is not news to me! I worked on crews that built them down here! I seen Miami come from boarded up hotels in 1988 to Billions of dollars of new construction on Ocean Drive over the next decade. So don't think this thread taught me much in that regard.
I know of whole housing communities around me that were purchased; left empty, so the buyer could turn them over in a year or so and get 15-20% return on his investment. Crazy!
One additional point about the condo market bust. It neither detracts or negates the comments about huge increases in value, interest only loans, long term low interest rates and other factors. When you are building condos you are developing a lot of individual units in one big property...or some kind of land deal. The deals take several years from start to finish. The buildings that are going up now or went up last year and so on were started years before that. Buy the land, get it rezoned, plan the building, get a loan, construction starts after all that. Construction takes a year or 2 or three. All the projects are long term and were started a while back. Most of them started before the highest pitch of the real estate boom hit. Things looked rosier then. Also and very important. Development is a fractionalized business. The absolutely largest developers have teeny teeny shares of the market. So there are lots of ballsy developers, all of whom are risk takers and typically working with mostly other people's money. But none of their projects has an enormous impact on the overall local market (on their own). Real estate is very cyclical in part because building and developing is very long term. Someone starts a project a year or two before interest rates change dramatically or other potential changes in the market. The whole thing is amazingly cyclical. It is very much a boom and bust type of business and has been for decades.
At the end of the day Kerrys comments (although wrong) were no worse than this: http://www.youtube.com/watch?v=Dc40lUpql10&eurl=