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mino2126_IHB

New member
So lets get this straight....Car sales way down b/c of housing woes and consumer debt, retail sales saw the largest decline in volume since 1970, lending standards are getting more stringent, housing inventory in the majority of metro-US markets are at or near all time highs, and Mr. Sheriff Deputy is getting paid a lot of overtime to post all those pesky default notices FBs homes.





Think I will crack open a beer and sit back and watch the show. I can only wonder if the climax is going to be as good or better than the beginning.





http://www.usatoday.com/money/industries/retail/2007-05-10-retail-sales-weak_N.htm
 
<p>just wanted to start by letting the bloggers at this site know how thankful i am for all the useful information. but unlike all the bears here, i don't take joy in hearing about other people's foreclosures woes. however, i am definitely not a bull and do expect prices to drop. perhaps down to a median of 350K for a condo and 500K for a SFR. and as for the collapse in the housing market, i seriously think that only new homeowners who had bought in 07, 06, & 05 might have a problem with their mortgages. 90% of the homeowners have owned for years and do not face any imminent danger. </p>

<p>but having worked at the newport-mesa, huntington beach, irvine, tustin, and garden grove school districts, i have become very intimately knowledgable of the various communities in central/coastal Orange County - or more specifically, the residents of these communities. with that in mind, i love the OC and would never want to leave or move. and although i'm a licensed real estate broker, i will be obtaining my teaching credential in math this fall. and no, i'm not a starving realtor. i am a UCI grad with various income streams. i like being able to earn income in whatever way satisfies me most - whether teaching math or doing real estate financing. i expect the market to be weak all through 2007 and 2008, but i am more than ready to utilize my skills and knowledge once the market normalizes in 2009. so far all the housing bears out there, it's okay to expect a justifiable decline, but please don't laugh at others' misery. real estate is a professional industry that supplies important needs to real people.</p>

<p>in the meantime, i would like to contribute my knowledge of all the various high schools in this region to anyone who may have any questions. for instance, Tustin High isn't the best high school around. but they are relocating to the Tustin Marine base around 2010-ish; by the Villages of Columbus. Moreover, VoC is located in the 92782 zip - which is a very high income area. So... although the school is not outstanding now, with the move, the new construction, and the new zip code, it is safe to assume the school status will improve dramatically.</p>
 
I keep on reading the abbreviation VoC. What is VoC?



I don't know what the percentage is, but I suspect that many who have owned their homes for years have Heloc'd there way to no equity or close to no equity by using their homes as ATMs.



I take no glee in someone else's bad circumstance, even the flippers. I will however jump up and down with joy when I can purchase a home for much less than now, and I drool with anticipation as I watch the show. Popcorn anyone?
 
there we go again. i know tons of people who either own their home straight out or still have their original mortgage. yes, i do hate flippers who have made hundreds of thousands for not doing much, but the majority of homeowners are doing just fine. it takes only 10% of the homeowners selling activity to jack the price up and it only takes the same % to drop prices. so once again, it's the new homeowners who are in danger of defaults and foreclosures. personally, being in my 20's and knowing friends and families who have bought within the past 2 years, I'm concerned for them. i do hope for prices to fall, but i hope it will only dampen people's investment rather than putting them in financial hardships.
 
<p>hs_teacher</p>

<p>I'm pretty sure that most of us are not taking wholesale pleasure in the financial woes of others, as there are individuals that merely needed to buy a home and had no intention of flipping, investing, etc. But flipping/investing is only part of the issue. For all buyers, there is a question of asking where the rubber meets the road - when a buyer who had originally bought above their means is faced with the consequence of not thinking their purchase through, as both their mortgage rate/terms and the overall housing market readjusts. For those individuals, while it may be unfortunate, they too have contributed to the pricing mentality that so many bears and prospective home-buyers decry. I suppose that at the end of the day, I don't take all that much pleasure in their financial misfortunes, but its hard to say that such misfortunes don't benefit me as I think about how, where, and when to buy.</p>
 
hs_teacher,





I don't think this board is populated with sadists. People are not reveling in others misfortunes simply for the sake of it. Those of us who recognized this bubble early had to listen to a great many smug morons who bought knowing their brilliant investment was a sure thing. When the masses are doing something very stupid and ridiculing us for not doing the same, it builds up a certain level of schadenfreude that comes through when people comment on failed flips.


<em>


"i do hope for prices to fall, but i hope it will only dampen people's investment rather than putting them in financial hardships."</em>





Wanting this to happen is nice, but the circumstances coming together to impact the housing market are pretty bleak. The market does not respond to people wishes, only their actions. Foreclosure and bankruptcy awaits a great many homeowners who purchased over the last 3 years. Some will make it; many will not. If most of your friends are in their 20's as you are, they will most likely be among the casualties. No money down, overextended buyers who need 100% increases in salary to make their upcoming payments on a depreciating asset will either walk away or be crushed. This probably isn't what you want to hear, but it is the truth.





This is just a reality of life. Some will take pleasure in it; some will not. Most on this board will simply be waiting to pick over the bones and create new dreams where yesterday's homedebtor's dreams died.
 
HS_Teacher.....welcome to the blog and I give you many kudos for being a school teacher. You are way under payed and under appreciated.





I will be quite frank here, I will purely joy and relish each and every FB that gets his pants taken in the coming months / yrs because he / she was very foolish. In the recent yrs I have heard that housing is such a great investment, you can't go wrong, or that you will never loose in RE. All these ppl are now in for a rude awakening b/c home prices are so far outside of fundamentals that a big pop in the bubble is just on the horizon. When foolish money prices out people who really want / need homes and now they are doing everything possible to get out or get govt help....I have no pity for them making bad investment decisions.





Now I will agree with you that in some of the older "more" established neighborhoods in Irvine their will not see the defaults that newer neighborhoods like Turtle Rook, Woodbury, Northpark...etc. The newer neighborhoods are comprised of young adults who believe they should be able to live like a CEO for a fortune 500 company. That includes very nice homes with all the amenities, luxury cars, expensive vacations....etc. Keeping all that in mind it is probably why as a country we have an average negative $9,000 saving rate. Our younger generations are in deep doo-doo and it's going to get ugly.





FYI....I even heard a few economist recently say that we could get into a recession that is worse than we say during Regan's era.
 
hs_teacher - I think your comments are valuable, but I think you are wrong about the number of 30's, 40's, 50's folks who have used their home as an ATM to support a lifestyle that is not afforded strictly on their income. Most may be able to keep their homes, but the decrease in consumer spending will be dramatic and that decrease will affect incomes and home prices. Just like the mass psychology mania drove prices beyond affordability, a mass psycology depresson will drive prices way below affordability.
 
wow. thanks for responding! i hadn't realized how personal this blog can be. as for the psychology depression theory... here's my take on it. real estate value is an issue of wealth, not income. if the average salary of a teacher goes up, most teachers will get paid more. so the income is realized by many. in real estate, let's say out of 100 homeowners, 10 have sold at a higher price. just these 10 sales will increase the values of all the 100 homes. of course the other 90 homeowners have not realized any gain. so... in this market, if 10 out of 100 homeowners have to sell at a lower price, all the home values will decrease. but once again, the other 90 homeowners do not realize any loss. my point is, no matter how much consumer spending decreases or however much equity is taken out of a home, it doesn't really affect real estate prices directly as long as these homeowners aren't buying or selling. it's the sales activity that affect home values. so if you are primarily interested in home values, don't look at all homeowners, just look at the buyers and sellers. value will go down if current sellers 1) need to sell and 2) have to sell below current market. value will also go down if buyers 1) won't buy or 2) will only buy at lower price. nonbuyers and nonsellers have no direct effect. so the actions of a few (relatively speaking) will affect the home values of all. does anyone know if many sellers NEED to sell and WILL sell lower? that ultimately will determine the prices for all.
 
HS_Teacher....your arguement makes no sense. If you are wealthy because you own a home then why would you ever want anyone in your neighborhood to sell for less, and if they do don't you loose net wealth? I personally do not think you are a wealthy person because you "own" a home....however, if you are an investor and buys multiple properties to rent out then yes you could determine that you might be wealthy depending on the value of the property.





As for consumer spending not affecting home prices it has a tremendous affect on home prices. It shows just how much people are able to spend outside of their living expenses. When consumer spending begins to decrease it is a sign that the economy is going into a recession. Incase you did not know in a recession, consumers attempt to save instead of spending on large ticket items.





Finally home values / sale prices are not determined by sellers right now, they were in '04 and '05. They are set by supply and demand and as you can see right now, demand is very low so yes sellers have to reduce their prices but at what price buyers are willing to buy will only be up to the buyers not the sellers.
 
<p>hs_teacher and mino2126, you both seem to be saying the same thing about consumer spending and its affect on home prices. I think. To take mino's example a little farther... A decrease in consumer spending indicates that that there is less disposable income, less disposable income means a household has less ability to adjust to financial hardships, then, assuming some financial hardhips, then there will be more (unwilling) sellers (i.e. need to sell b/c households cannot adjust). More sellers, less buyers means housing prices will fall.</p>

<p>I think that hs_teacher was arguing pretty much the same thing, that consumer prices don't have a direct effect on home prices, but they may affect them indirectly.</p>
 
Actually, that which will effect the price of homes is the dispostion of the collateralized debt obligations and credit default swaps that are supposedly supporting the overall mortgage risk. If these derivatives carry on without too many being called in at one time, the mortgage market will survive relatively unscathed. If however, they implode, which I consider to be much more likely, the market for any type of mortgage will quite literally dissappear. Please pass the popcorn.
 
<p>hi fellas... first of all, i gotta say it's always so fun to read responses. and now, my responses to your comments:</p>

<p>1. wealth is equivalent to equity - which is a "stock" as opposed to a "flow". your wealth is simply your net worth - assets (real estate included) minus liabilities. this is what i learned from my econ class at uci and accounting class at occ.</p>

<p>2. consumer spending does affect people's ability/willingness to buy. but the only people who matter in terms of home prices are: home sellers and home buyers. so... even if i am a homeowner who pulled out all my equity like an ATM; if i have no inclination to sell, i have no effect on home prices.</p>

<p>3. prices are determined by supply and demand. the supply provided by home sellers versus demand by home buyers.</p>

<p>i guess i only had one point. there is a significant distinction between homeowner and home seller. it's the latter (a small percentage of homeowners) who ultimately will determine home prices. if there are a lot of home sellers who have to sell for much lower, than prices will drop. all the other inactive homeowners are mere spectators.</p>

<p> </p>
 
HS_Teacher....I respect your opinion but I just believe it is way to narrow. It's like saying a publically traded stock on rises or lowers when buyers or sellers are in the market.





Home prices are impacted by multiple factors such as short-term interest rates, yield rates on loans, loan packages, disposable income, yearly income....etc. I wish it was as simple as saying that seller X wants X amount and buyer Y is willing to pay X -/+ Z. Below are a few other comments:<em>





</em><em>2. consumer spending does affect people's ability/willingness to buy. but the only people who matter in terms of home prices are: home sellers and home buyers. so... even if i am a homeowner who pulled out all my equity like an ATM; if i have no inclination to sell, i have no effect on home prices.





</em>You state that the <em>"only people who matter in terms of home prices are: home sellers and home buyers," </em>I asked the question earlier and didn't get an answer so here goes again. If I am in a neighborhood where sellers are selling for a lower price does that not decrease my net wealth? Also, if I am trying to increase my net wealth wouldn't I then put my house on the market as to not damage my net wealth any further?
 
thought everyone would like to see this, from Calculated Risk:





Home Depot Inc. on Tuesday reported a 30% drop in quarterly profit, blaming the faltering U.S. housing market as well as unusual weather, and forecast a weak home-improvement market for the rest of the year.


...


"The housing market continues to be a challenge, and erratic weather conditions across the United States negatively affected our spring selling season," said Frank Blake, Home Depot's chairman and chief executive ...





"We believe the home-improvement market will remain soft throughout 2007," said Blake.
 
<p>hi mino! i agree that i am being a little narrow, but i think some are just being too general - like relating the stock market, the war, the presidency, natural disasters, consumer spending, etc all to home prices.</p>

<p>as for your question, if you are an owner in a neighborhood where home prices are dropping, then your net worth is going down. it's like owning gold or any other asset - if the value goes down, your net worth goes down.</p>

<p>as for your second question, i do personally know a homeowner who has sold and is currently living in a mobile home. he liquidated his home and converted it to cash to prevent any loss in value/net worth.</p>

<p>but for many, owning a home is more than just a measurement of net worth. i have a friend who laughs when the market was going up. she didn't care how much "richer" she became because she had no intent to sell and assumed that the market will go back down anyways.</p>

<p>so once again, my only point is... home prices do not necessarily affect all homeowners. it's the ones who are participants of the buying and selling that are mainly affecting, and effected by home prices.</p>
 
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