Foreclosure in Norfolk>Question Details

Bubble Boy, Home Buyer in Norfolk, VA

How much longer until we see real price declines?

Asked by Bubble Boy, Norfolk, VA Sat Dec 15, 2007

I am a would-be-buyer in Norfolk. My income isn't quite 6-figures yet, but according to what other people make I do okay. The whole housing bubble has definitely pushed me into being a fence sitter, and rethinking the strategy of buying a house. None-the-less, I continue to watch the market. When are we going to see real price declines? Where are the loads of REO (Bank owned) properties that are being repossessed? I've started to work on gaming the FICO system to boost my score into the high 700s (never needing to use credit has hurt me in this respect). Meanwhile, I'm working hard to save more than $2000 a month. I am hoping that in a year credit is so tight that only those with 15% to put down can qualify. I know that many people bought homes at stupid prices, and will be ejected from them when the teaser rates adjust. It's just annoying waiting for it to happen. This was all predicted in 2004 and 2005. Let's just hope the gov't doesn't bail out the gamblers who are stuck. Grrr

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Greg’s answer
Because of the Media? Nice, blame them and not the Banks, mortgage companies, people that spent beyond their means, the Realtors that told them "Real Estate never goes down", Flippers, and more.

Yea it is the Media. Oh, and we will turn this around in 2009 and see the same prices even with no Sub-prime, higher rates on Jumbos, too much inventory, and tougher credit requirements.

How are you going to make lots of money? Buy low and sell high? You buy in 2009 and when are you going to sell high? 2015?

1 vote Thank Flag Link Sun Jan 20, 2008

You are right on track ! Because of the Media the prices keep falling ! The Real Estate market is now acting like the Stock Market . There are Millions of buyers just waiting for the bottom . so when the bottom hits .

I am going to Stick my neck out with a prediction and ( The day is January 20th -2009 shorty after noon Eastern stand time Prices will begin to rise dramatically ) Some people are going to make a lot of Money !!!!!
0 votes Thank Flag Link Sun Jan 20, 2008
I understand your position on bailing out gamblers. No one feels good about bailing out those who took high risk. The domino impact on the economy when financial institutions take a hit is across the board. The run-up in housing prices created a wealth effect that triggered much spending and boosted our economy.....even if it was a false boost. People renovated their homes, refi'd and spent $$ at Home Depot, bought cars, etc. All those $$ fueled into the economy. When the opposite happens, and there is a contraction......the results will follow the pattern. As fewer $$ are spent, and financial institutions have this hit, it will impact all of us. As much as I might share your frustrations with 'the gamblers", I also put a concern for what is best for all first.

John Vogel, Adjunct Professor at Darthmouth Tuck School of Business has introduced his proposal for the "The Last Chance Mortgage" which would allow homeowners in trouble a reduced interest rate, but they would forfeit appreciation opportunities. Interesting... Here is the link:

I plan to post this as a new thread, because it is worth reading and discussing.
0 votes Thank Flag Link Sun Jan 20, 2008
Deborah Madey, Real Estate Pro in Red Bank, NJ
I see you're hoping for some real dire conditions in the market! What will you do 5 years after you buy? I'll bet you'll sell for as much of a profit as you can! The fact is there are areas that are not seeing truckloads of REOs and prices are not declining as much as in other areas. I wish I knew how long we are going to see prices decline, I suspect the answer is different for every part of the country. And the only way we will know is when they start going back up.

But I'm with you as far as bailing out the gamblers. However, I think they are few. There are, IMO, many people who truly are in trouble, who aren't gamblers, and I hope the government can come up with something to help them such as freezing their interest rate.
0 votes Thank Flag Link Sun Jan 20, 2008
If you're close to earning six figures, I'm surprised your CPA isn't jumping up and down screaming at you to buy a home just for the tax deduction. The good news is your were right to wait over the past few years but if I were you, I'd wait no longer.

I recently closed on a $399,900 purchase and the seller paid $9,000 of my client's closing costs. We also negotiated $900 less for the property, and the property is within walking distance to the beach in Hampton. More recently, my clients have been receiving 5.00% to 5.25% interest rates - a fixed rate for 30 years. With so many homes to choose from, true historically low interest rates, and the tax deductions afforded only to home owners, why wouldn’t anyone buy now?

It sounds like you are doing a good job within bumping up your credit score, as the folks with at least a 720 are receiving the better rates. But I'd honestly not wait much longer to buy. Historically, interest rates rise during the summer and also during election years.

Frank Biganski, Realtor ABR
0 votes Thank Flag Link Sun Jan 20, 2008
A few quick random observations:

Bubble: I agree totally with your hope that "the gov't doesn't bail out the gamblers who are stuck." There are some, though relatively few, who bought with good intentions, thought that their income was steady, didn't go for an exotic mortgage and yet, through circumstances beyond their control, ran into trouble. But most were gamblers. Some were so-called "investors" (truly speculators) who'd get into properties with little or no down, not even plan on occupying them, intending to flip them to another buyer. Then the music stopped. Others just had no business buying. I think someone was selling them on "the American dream" of home ownership. But people with part-time jobs or low-level service jobs were buying $500,000 properties (from people who'd paid $300,000 for them just a year before), 100% financing, zero down, adjustable rate mortgages. Read the papers; they're being foreclosed on just 6-10 months after buying. That means they barely made a single payment before defaulting. What were they thinking?

You ask: "When are we going to see real price declines?" We're already seeing them. Granted, lots of people overpaid in 2005-2006. But houses that were bought for $500,000 then are coming back on the market now at $350,000-$400,000. Sometimes less.

One of the other posters, trying to counter your view, writes in part: "Land is a limited resource, housing, even more so. Unless people stop having babies the demand for housing will continue to grow. As long as the demand continues to grow, which it will do at a rate that will out pace the development rate, there will always be a demand for housing. Short of a drastic population drop, there is no way that the real estate market is going to fall by 40%."

Well, overall demand may continue to grow, but not evenly, and not uniformly. Right now, everyone needs a place to live. They did as well back in the late 1970s when interest rates were 16%. But where they choose to live, and in what, can shift radically. People may move from ownership to rentals, and they're doing that now. There may be shifts in markets from condos to townhouses or single-family homes. If major companies close a plant or location, people may relocate. Sure they still need a home, but it might be in Charlotte rather than Detroit. As baby boomers age, there may be a shift from the Northeast and Midwest to the Southeast and Southwest. So, big picture, a growing population needs additional housing units. Locally, though, you may see wrenching changes.
0 votes Thank Flag Link Wed Jan 9, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
Bubble Boy!

I have been reading some of your posts. You have a very apocalyptic view of things. I was wondering if you have any data, from any sources or maybe even a few credits in economics to support some of the views and opinions that you have stated here.

I was wondering if you had any involvement in the market decline of the 80's. There were a bunch of people running around pitching the same kind of rhetoric back then as well. But they were wrong and so are you.

Land is a limited resource, housing, even more so. Unless people stop having babies the demand for housing will continue to grow. As long as the demand continues to grow, which it will do at a rate that will out pace the development rate, there will always be a demand for housing.

Short of a drastic population drop, there is no way that the real estate market is going to fall by 40%. And if does your mortgage and the current market value of your home will take a back seat to much more pressing issues, like food and drinking water. A 40% drop in U.S. housing would put the world economy in the dumpster.

Real estate, being as finite as it is, can not fall in value like a stock. When the price of stock falls to much people get worried that the business could fail or is failing. And when a company fails, its stock is useless and without any value. Again without a drastic population drop, developed real estate will never be useless. With that said, as the price falls the number of interested buyers will increase not decrease.

And yes 2004-2005 is when the news started covering the real estate issue, but those of us that are familiar with the cyclical nature of the market and lax lending practices of 1980’s were talking about it and planning for in 2002 and 2003. This is not the end of the world it is part of the cycle. Sitting on the fence is a waste of time. Do some research, find an up and coming area, identify an undervalued piece of property, get a good 30 yr fixed rate and buy something.

I have never met a really successful pessimistic fence sitter?
0 votes Thank Flag Link Wed Jan 9, 2008
Most FINANCIAL estimates, I separate that from emotional estimates, say at least 2012 when all the junk ARMs have reset and we are back to fiscal sanity in the financial world. Don't take anybodys word here, read the article "after the money is gone" from the NY Times. It will explain everything.
0 votes Thank Flag Link Sun Dec 16, 2007
My take on the local market a recap of an article in the Daily Press :
For the first time in months, the Daily Press has published a good story on the real estate market in Hampton Roads ! I wanted to recap it for you, in case you didn't see it on the front page of Saturday's business section. Not so much that it was a positive story (that would be expecting too much!), but it was at least an accurate analysis of current trends.

"It may have taken longer to sell a home in '07 than '06, but sellers have been gradually reacting to over supply by taking their homes off the market. This trend will help the sellers who most need to unload their homes, and it should help support prices, because buyers don't have the multitude of choice that they have enjoyed."

I'm not sure that Flores ( the writer) is quite right for the reason that new listings are down, but he is correct about the outcome. I would argue that inventory is thinning naturally because of the season. That's an important distinction, because if I'm correct, this trend will begin to reverse in January. That means sellers should not delay putting their homes on the market.

"In many regional markets, foreclosures are feeding extra supply into already slowed-markets. But,
Hampton Roads has one of the lowest foreclosure rates in the country, according to RealtyTrac. The region also has a lower percentage of sub prime loans, and the borrowers are doing better making their payments than their counterparts nationally."

Wow...good news!! Shame it didn't make it all the way to the headlines! It is so important that we are able to spread the word on this...make sure that you are shouting from the rooftops that "real estate is local" and our market is outperforming the national real estate market by a significant margin.

"On the Peninsula, Hampton posted an almost 8% price increase as sales dropped 11%. In
Newport News, the median price rose 2.5% as sales slumped almost 17%"

True, sales are off from 2006...but, that should be taken in context. 2006 was a record year! In other words, 2007 unit sales are simply *normal*!! And, the fact that we've been able to maintain positive gains in appreciation despite a slowing trend is a huge testament to a strong local real estate market.

What's the bottom line? Sellers should move now, because the first quarter of 2008 is unpredictable. There may not be a zillion buyers out there in December, but the ones who are looking are serious. Don't delay! And, buyers are crazy not to take advantage of the combination of heavy inventory and sellers' fears; it is very possible that we will see the market begin to balance after the holidays (the last 2 months statistics point to that), and the deals won't be quite as aggressive as they are right now.

My two Hampton Roads Virginia Real Estate
I wish my crystal ball were working a little better.
0 votes Thank Flag Link Sun Dec 16, 2007
Happy Saturday. I am a real estate professional in Georgia. There are many buyers here on the fence. They know it is a great time to buy; however, they are scared the market will continue to decline and they will make a bad investment. They are also waiting for that decline to get a steal of a deal.

Here is what my "cystal ball" tells me. With exception to the hardest hit states such as Florida 2008 is going to remain much like 2007 (high inventory, low demand). I believe that builders and sellers alike will gain confidence late 2008 as inventory and demand begin the road to balance. 2009 will show improvement with more balance. We will see that 2010 brings back a modest rate of appreciation.

With all that being said. Real estate was intended for a long term investment and not a "get rich quick" investment that it became in Florida, California, and some other states. It is my hope that you are looking at getting a great home at a great price with the intention on staying put for 5 to 10 years. The deals are in the marketplace now and will continue to be through most of 2008. Foreclosures do not always mean the best deal so be cautious and find a great agent to help you through the home buying process. Foreclosures take expertise and knowledge... you have to worry about liens and opening a can of worms.

Save the money so you can get he best mortgage possible. Watch the market carefully. As of right now, I would recommend a buying looking to buy at the possible best time to buy between now and the end of 2008.

Good luck on finding your bargain!
0 votes Thank Flag Link Sat Dec 15, 2007
Hello there Bubble Boy. I guess that means the Bubble has affected your plans? Don't give up, I would suggest that you keep saving the funds toward a good down payment. You are correct in your assumption that financing will be more difficult to acquire in another year as lending restrictions will become narrower and tighter. Lenders are going to require better credit scores and higher down payment. As to when it will end, I have consulted my crystal ball, and I see some positive changes occurring in the year 2009. Wish it was more encouraging...but there is always the chance that my crystal ball is cloudy? Keep saving and looking. You'll find that good deal yet.
0 votes Thank Flag Link Sat Dec 15, 2007
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