United States Heading towards a Depression?

That's funny! I was talking about the Midwest.

I don't know what state you're talking about, but the entire real estate market in my state is in serious trouble.

Nothing is selling, whether million dollar lakefront homes or middle income split-levels, or foreclosed properties, nothing is moving!

But, it's a great time to be a buyer.

The problem is, with banks restricting credit, who has the money?

 

The midwest encompasses a lot of states. 14 in all.

Sucks to be you.

That is because many buyers are still asking the inflated prices that caused the problem to begin with.

Many do that because they overdrew credit on that inflated amount and now want to recoup it. That is not a housing market or credit crunch problem. Thats and irresponsible lender/owner.

Of course. When I bought my home it was a great time to be a seller. These things run in cycles.

I see banks still lending money hand over fist.

The people that have the money are not going to pay for inflated prices. They are going to buy bargains. It does not make sense to overpay for something.

The house behind me was bought by some flippers too years ago. They came in, put in new carpeting, and a little paint and tried to aske $150,000 MORE than the fair market value. Needless to say the house was foreclosed on a few months ago. Just had to call the city to get them to cut the grass again.

The people that lost the house skipped town and moved to Sunny Isle Beach Florida to start the process over again, no doubt. That or because it is cheaper to live there.

Or both.

 

Hmmm. I wonder why you say that.

But, I'm quite sure the millions of American citizens in my state (responsible or not) would appreciate your sentiments.

It's the perfect attitude to keep this country humming.

 

Look at is this way. You loose your job and you collect unemployment for 6 months. Your unemployment runs out and you get a stimilus check and a 13 week unemployment extension. You still don't have a job but a check is coming in every two weeks.

The average bear market drops 32% and up to today the market has fallen 20% from its October highs.

That's fallout from the first housing bailout from Feb where the governmnet eases Fannie Mae, Freddie Mac mortgage caps to accept bubble loans and houses valued up to $724,000.

In a speech in San Diego, San Francisco Federal Reserve President Janet Yellen said problems in the housing market and banking system could get even worse before the economy recovers.

http://news.yahoo.com/s/ap/20080707/ap_on_bi_st_ma_re/wall_street;_ylt=AnZKFvYRfJzEWJauWr_yg4KyBhIF

It's going to get worse but that is the way it is.

Lax lending has inflated prices and most of the subprime loans don't even have a down payment.

In real estate there is no value at today's prices. When you factor in taxes and maintenance there's a negative rate of return.

 

When you factor in the inflation, a REAL 32% drop can't be far away if it is not already here. Inflation is easily running 12% or whatever Shadow Stats is reporting these days.

However, please remember, it is just a CORRECTION!

 

Yep. As he said, it is just a CORRECTION!

 

Not totally on subject but sort of.
I just recently 'within the past year' bought a house.

Before I bought this one we had put bids on 2 other houses, the first one I liked much more than all the others. Had a great private lot, lined with trees all the way around the outside of the lot. Was also on the very end of the street 'dead end' next to the local golf course and soccer field. Simply an awesome location.

House was built in I believe the late 80's or early 90's, 3 bedroom, 2 bath, attached garage, etc.

Anyways it was a bidding war and we didn't win. Now I see however the same house back on the market already, now however the price has been reduced greatly! The asking price is like $115,000.00 which is well under the price we almost bought it at. I forget the exact price but believe it was 20 or more thousand than it is now!

Another example of person could not afford house, now house being sold at a fraction of what it once was worth.

Instead we bought a brand new house right smack dab in town. Not bad, but damn wish we didn't buy yet would love the other house, could have saved almost 100K as well!

 

Did it ever occur to you that that home may have been way overpriced to begin with?

This is a prime example of a correction.

 

It was actually WAY under priced, according to everything on it.

What 'it is' right now is a prime example of the housing market being in the shitter.

---BTW
I do not say this blindly, I have several inside sources to the history of homes, their value, their assessed value, etc.
My friends mother for instance is a licensed appraiser for the area, she is able to give me the run down on selling price, valuations, assessments, etc.
The beginning selling price was WELL under what the house was worth, it's why the house sold immediately upon listing.

 

The problem with the housing market is that the actual price of a home is what someone else is willing to pay for it not what the agents or appraisers tell you it's worth. Same goes for everything. So until we have a strong economy with a REAL and strong currency the housing market will continue to go south. At this point it is a snow ball affect. It will only get worse before it will get any better. As a homeowner myself I feel the pain as I have to hold my house who knows for how many more years before I sell it again (I have never borrowed against my equity and I never bought to speculate). I bought in 1999.

 

Home prices were bid up by flippers and people with subprime loans. You can never win bidding against people that have no money.

Anybody that bought before 2005 is generally in the black. Your house is worth a lot more than you paid. Why are you in pain?
Another example of person could not afford house, now house being sold at a fraction of what it once was worth.

 

Yes in 'some' cases, the home in question however was put on the market in the beginning well under it's assessed value, well under similar houses nearby.

I paid almost 200,000.00 for the house I am in now, this house I could see the argument of the price being driven up, not the other one.

 

Which is why it's good to understand markets and the business cycle. Even if you are not in business, it can help you plan your larger capital investments and savings strategies.

 

No business cycle will let you know that a house you wanted to buy will shortly become available again

The house I did buy I bought well under the assessed/appraised value as well. I bought it when prices had already tanked significantly.

 

I got you. The credit crunch is making it harder to get loans and a lot of people are not buying due to uncertainty in the economy.

 

Not absolutely, but it could signal an opportunity.

You can't control the business cycle, or the market on a large scale, but if you understand which way the herd is heading, it's a lot easier to make accurate predictions. Skilled entrepreneurs have been doing that for centuries.

 

I still got a decent buy on my current one Brand new construction, in a very desirable location, within a few minutes walk to my gym, 3 bed, 2 bath, 2 car garage for a good chunk under 200 k.

Before the market went south it would have cost at least 200+ k starting for a house in this area.

Could I have waited longer? Sure, but then I wouldn't have gotten as much as I did for my old house

 

Do you think that the first house could bring in good rental income if you bought it?

It all balances out in the end. If you needed the space and you where selling too than the home was more than an investment.

 

Oh definitely. Part of me would love to buy it

It's in a great location, so private.

 

The pain for me is not that I bought a house I could not afford or that I am upside down like most people today, far from it. The pain is that I should have sold when I had the chance that's all. At this market I have about $70,000 in equity as opposed to about $100,000-$120,000 3 or 4 years ago, I should've sold then. I guess I should have clarified my position. Either way my house is almost paid off so I have nothing to worry about.