Value of US homes continues to fall

Value of US homes continues to fall

www.presstv.ir

According to the firm, losses come in more than 60 percent higher than last year's. Since the peak in 2006, US homes have lost a massive 9 trillion dollars in value through the end of 2009. This figure amounts to more than 60 percent of the US annual economic output.

(visit the link for the full news article)

OK, I admit I'm not good at economy so I will act the dumbest and ask the most easiest questions for those who are familiar with such ding dongs.

1. Is this GOOD or BAD? :p

2. Can people from foreign countries buy houses in US? I feel like buying one and then wait till the prices go up again?

3. How will it effect US economy if people from foreign countries buy more US homes? Will that increase the home prices?

4. How low can the prices go, before it bounces back. It has to bounce back sooner or later??

5. Can the losses ever be gained back?

Anyways, sorry if the questions sound stupid, but I really did always suck at economics.

Thanks in advance for the answers.

oz

www.presstv.ir
(visit the link for the full news article)

I'd say it was a pretty serious matter if you bought a house when prices were at their peak and now want/need to sell. The inflated prices benefited no-one but the banks. Instead of borrowing 70k the average family were requiring to take out loans of 200k+. Ok sell that house when prices were at their peak and cut a neat profit - but you still had to buy another one to live in....and take out another massive loan.


A house should be a home...not an investment or a bank account. (all that equity was paying for cars, holidays etc). It was always bound to fail. When prices got to the stage that anyone could go down to the local hardware store and build their own house cheaper by buying one brick at a time than the same house could be bought....something is way wrong. Its not even really economics - its sensible house-keeping.

Originally posted by oozyism


OK, I admit I'm not good at economy so I will act the dumbest and ask the most easiest questions for those who are familiar with such ding dongs.

1. Is this GOOD or BAD? :p

2. Can people from foreign countries buy houses in US? I feel like buying one and then wait till the prices go up again?

3. How will it effect US economy if people from foreign countries buy more US homes? Will that increase the home prices?

4. How low can the prices go, before it bounces back. It has to bounce back sooner or later??

5. Can the losses ever be gained back?

Anyways, sorry if the questions sound stupid, but I really did always suck at economics.

Thanks in advance for the answers.

oz

www.presstv.ir
(visit the link for the full news article)

I dont claim to know much either, but the loss is just a reflection on the complete economic monster the US has, the entire system is going to downgrade significantly and hopefully not completely break. The job and housing markets are a direct reflection of the economic might of a country. When people cannot work and cannot afford a house the house market must adjust or they wont sell.

I am sure the banks enjoyed giving loans out to unqualified people for years, which made a pseudo price inflation that would cause the bubble which burst.

Investment in a stick frame house is not a good investment, they are weak and dont stand the test of time. I would definitly not buy anything right now, that includes overprices overinflated used cars (which is even more inflated becuase people can more readily obtain a 30,000 dollar auto loan over a 300,000 dollar house loan)

The bottom is falling out, put your head between your legs and kiss the buttocks goodbye if you are still considering any market a viable option other then what you can physically own (not debt) that has a value behind it. I dont think that snazzy new ps3 game is going to be of much value soon, you cant eat it or shelter under it (unless you had several thousand of them)

good luck

Foreign investment in real estate is tricky business. Up here in Vancouver Canada, the housing prices are so high most will never afford to buy a home. This is partly due to foreign investment. Investors buy up property and leave the space empty, leaving a skyline peppered with few lights. This type of investment is unregulated, and drives up cost. However, for those who actually live here a modest home will run you over a million.

www.crackshackormansion.com...

there is a similar situation here in the uk. house prices for a modest terraced house in cumbria almost tripled in price in a few years from 2000 onwards. being clued up within the construction industry is seemed to me at the time they were intentionally inflated for the market. this artificial imo inflation in value satisfied a number of criteria one example being the unjust council rates set on the value of homes. furthermore there are many families/owners now who are in negative equity simply because they borrowed too much on their homes to either fund a lifestyle or to make ends meet. a very large deposit coupled with solid proof of income now determine whether one can satisfy the mortgage conditions for approval.
the negative equity situation is a terrible place to be as you are still paying the agreed amount although it is not worth that amount anymore.
f

I just read an article in the newspaper about how the price of homes in Ohio are so cheap that foreigners and out of staters are buying them up as investments.

Deals in Toledo lure overseas, out-of-state buyers to pounce on foreclosures
www.toledoblade.com...

Originally posted by oozyism

1. Is this GOOD or BAD? :p

If you bought into the inflated economic magic it's bad. If you've been suspicious of all of this manufactured splendor for the past 30 years it's not exactly "good" but it isnt exactly bad either. Never would have been an issue if so many politicians were so willing to play the game of "screw you and buy myself a yacht."

2. Can people from foreign countries buy houses in US? I feel like buying one and then wait till the prices go up again?

Sure they can. They have all sorts of added taxes and fees though.

3. How will it effect US economy if people from foreign countries buy more US homes? Will that increase the home prices?

Fewer items on the market mean the prices of those items will rise.

4. How low can the prices go, before it bounces back. It has to bounce back sooner or later??

A lot lower than they are now. Hopefully they never bounce back to the fake inflated value.

5. Can the losses ever be gained back?

In a world of artificial worth, sure. In a world of real valuation, no.

reply to post by oozyism

1. Is this GOOD or BAD? :p

Its good for people that want to buy a house, bad for people that want to sell one.

But for the economy as a whole, I think it is good to know real prices than artificialy inflated ones, like before.

I am sure the banks enjoyed giving loans out to unqualified people for years, which made a pseudo price inflation that would cause the bubble which burst.

Quoted for truth.

this is good for everyone except people who want to participate in how good it is.

Originally posted by virraszto
I just read an article in the newspaper about how the price of homes in Ohio are so cheap that foreigners and out of staters are buying them up as investments.

Deals in Toledo lure overseas, out-of-state buyers to pounce on foreclosures
www.toledoblade.com...

In many of the mid sized cities in ohio there have been a large number of empty homes for years do to the moving of jobs overseas and elsewhere. Marion, Akron, Toledo ect. Now they are really cheep. I know a guy down the road that got almost an acre with a three bedroom for about 40G and that was durring the peak, before the pop. So he will only make money even now if he sells.

I live down the road in another area. We got a house there about 7 years ago with the same amount of land for 130G. Now worth about 100G. We have already refinanced so if we did have to sell we wouldnt be in the hole. There has been some sale activity around here becouse its just a perfect location. Maybe 8 homes in the last two years on our street have sold. However the prices are down at least 30% of what they were 5 years ago.

One has to keep a look out. There is a home 2 doors down going for around 85G with one acre and outside buildings, brick. Right behind us in a subdivision they are selling homes there for the same amount but with zero land and no trees.

Originally posted by fakedirt
there is a similar situation here in the uk. house prices for a modest terraced house in cumbria almost tripled in price in a few years from 2000 onwards. being clued up within the construction industry is seemed to me at the time they were intentionally inflated for the market..... a very large deposit coupled with solid proof of income now determine whether one can satisfy the mortgage conditions for approval.

f

It is a study how the conditions in UK and US developed and fell apart along the same time line, for the same reasons and with the same effect and result. Not many here in US know that events in the UK were the same at the same time. I remember reading a UK economic site back about 4 years ago and it was just like reading one in the US. It was all clearly a much larger scale scam than the local excuses given.

reply to post by Logarock


the building societies that failed over here took on massive toxic debt from the usa in the belief that
the mortgages were above board and consistent with the accepted risk. they were packaged and branded
as a very good risk unbeknown to the societies. it was over £500m and when the shtf the players scattered
like ants. due to the unregulated nature of the societies at the time (new ground for them), the fsa
(financial services authority) were and imo remain powerless to address this issue. some smooth talking
salesmen had a real result i guess dumping the crap on societies that historically never ventured into
the den of lions. greed on both sides i guess.

btw i'm a rush fan also!

regards f

I would say falling home prices are bad for the overall economy, however being a first time home buyer it's good for me.

I do feel this is being orchestrated though. I made an offer on a foreclosure, cash, owner occupied to Fannie Mae. I took the advice of the agent for Fannie to offer 80% of asking, they flat out rejected no counter. They told me that took another offer pending loan approval.

Now, what they don't know (and I'm sure they don't care) is that I currently live across the street. This home has still not sold, it goes back up on the market once a month or so, and this has been going on for a year, and foreclosed almost two years ago. They are just sitting on it. Now, after sitting unoccupied for all this time I'm sure it has more issues than it did when I made my offer. Oh well, I'm no longer interested they can keep for all I care.

I was employed as a mortgage broker a few years ago. They were recruiting a lot of extra people because the regulations re who could, or could not, borrow had been 'relaxed', and with the arrival of the self certificate mortgage there was effectively no regulation.

The mortgage market was opened to 'sub-prime' borrowers - a group who could never have been given a mortgage prior to these regulation changes. The industry was hugely excited - the majority of potential borrowers at the time were classified as 'sub-prime'....all that extra business - yummie. It moved from the sublime to the ridiculous when people with no actual independent income were able to get a mortgage. I'm in the UK where disbility benefits were allowed to be regarded as income.

Along with the 'perceived wealth' that housing equity gave us came the 'buy-to-let' borrowers, who were simply charged a slightly higher rate. These wannabe property developers, who had no actual capital to invest, bought up starter homes en masse and priced the 'normal' first time buyer out of the market. Again, it was this 'perceived wealth' that has kept our high streets so busy. None of the economic boom has ever been 'real'.

Interest rates at the moment are being held artificially low - 0.5% Bank of England base rate appears to be the only economic solution on offer. Again this cannot be sustained - when they go back to realistic levels of interest rate peoples' mortgage repayments in many cases will double or even treble.

It brings a wry smile to my face when I hear us being told 'we're coming out of recession'. Any recession hasn't actually really begun yet. Without the manufaturing base (courtesy of out sourcing to cheaper locations like China, India etc) we cannot work our way out of this one. It will be like nothing we've ever experienced when economic reality has to be confronted.

The outlook is for another 1.7 trillion in home value to be lost in 2011.

There are ~130 million homes in the United States.

That just over $13,000 dollars per home on average, of value lost, in the coming year.

That's actually a pretty tame pace for changing values of housing. The problem is the continuation of the trend and no increase in demand on the horizon.

It's becoming a big snowball!

Here in California, home prices tripled over the course of about 5 years. That is pure insanity, even in sunny California. The house I live in currently started that process at about 300K, went as high as just over 1 million and is now at around 600K.

I grew up here and so have known values in the area for a long time. In 1988 my family bought a nice home just down the road for 176K. When it was sold in 1998 it went for 255K.

It took ten years to increase about 80K. In 2001 I looked at buying it back, be cool to go back to by childhood home!

It was 320K at the time, roughly in line with past growth in value.

I looked again out of curiosity in 2006 and it was 980K and it sold!

That's 660K increase in 5 years!

~70K in 10 years had been observed over 2 cycles.

The suddenly 660K in 5 years. That's a pace of 1.32 million every 10 years.

20 times the observed rate of price inflation!

We haven't given back the ill gotten gains yet. We have a ways to go IMO, before we find a proper balance. Just judging from my local areas history. This is a VERY nice area also. It can justify greater expenditures more easily than your average city or neighborhood. If it is ugly here, where demand is relatively high, it must be much worse in areas that are more prone to swings in demand.

reply to post by searching4truth


Im in the same boat. Perfect credit history, stable employment, solid down-payment, shopping homes well under my budget, can't get a loan.

Of course 5 years ago when I had no money and only part-time work lenders were knocking down my door to get me to take a loan for homes there was no way in hell I could afford.

Sucks to be living at the mercy of scamming idiots.

reply to post by thisguyrighthere


I know, it's insane. What really drove me nuts is that I offered exactly what Fannie's agent told me to offer, in cash, granted I could've offered more at the time, but that is what they told me to do. For whatever reason, they want to hold it. It isn't even a great property, it's an average condo, nothing spectacular, and now it just sits there collecting dust and falling apart, they have not done any improvements and for some reason believe that it is going to actually increase in value.

reply to post by christina-66


very good and valid points indeed. when the base rate of the boe rises i for one will be watching the stats on the ons. i also agree there was a rush into buy to let properties with tv programmes encouraging people to become developers. that seemed to fall down the soil pipe for many as well.
f

Originally posted by oozyism
1. Is this GOOD or BAD? :p[/quote]
It's good for some and bad for others. Investors or a home buyer that can afford it will consider this good while banks(lienholders) will consider it bad.

2. Can people from foreign countries buy houses in US? I feel like buying one and then wait till the prices go up again?

In the US, money talks and BS walks. There's no law prohibiting foreigners from buyinh property.

3. How will it effect US economy if people from foreign countries buy more US homes? Will that increase the home prices?

Of course it will. Money will start to flow again and thus boost the economy. Home prices will start to go up because there will be less homes on the market.

4. How low can the prices go, before it bounces back. It has to bounce back sooner or later??

The thing about this is that an unoccupied home will still have need of maitenance and repairs. Small animals will find their way in and tear up the insulation, walls, flooring and etc. The sweltering interior heat, combined with humidity from the summer season, will damage paint and other finishes. The longer a house stands unoccupied, the more it'll cost to repair damages.

5. Can the losses ever be gained back?

The housing market is like any other market. It's a gamble. Losses are usually "eaten."