patrick.net

Obviously some bubbleheads have been paying attention.

Peter, I don’t see any boundaries on subprime.

Yep. Many professionals may get foreclosed upon.

Didn’t overextend, and probably have enough cushion to ride it out.

Hard to say. Many "prime" borrowers thought stretching to avoid getting priced-out was the right thing to do. If they had a warped picture of risk, they could very well be overextended.

Being prime have the integrity to do anything to preserve a great credit rating.

One needs a great credit rating to get into a reasonable mortgage. Once the dream of homeownership turns into a nightmare, the perception may change. They will do everything possible to keep the house though.

I have to reiterate that asset pricing has little to do with desire and affordability. It is everything to do with price projection.

The fact that a primary residence should not be seen as an investment does not change the reality that most people see it as such. It is all about emotion.

Time will tell, both are logical arguments. The nice thing here is that we all build consensus on the fact that no one disagrees both areas will increase. The matter of debate is how severe the increase in the larger population group will be. IMO it won't be that relevant to the price drops because enough subprimers with the flipper primes going into default will be enough to push house prices down to the absolute minimum.

The ideal situation for the up and coming JBRs is for the job market to remain reasonably strong, while house prices crash. Unfortunately I don't see both happening because the economy HAS to slow with a painful housing contraction.

The boys bathroom at my public elementary school was in decent shape when I started school in the late 60’s but I watched it decline (with no real maintenance) to the point where it was in worse shape than the bathroom at a scummy dive bar in the late 90’s

Bathrooms in public schools are just that: public bathrooms. That's another way of saying "The People's Bathroom" - and that's just communism.

Support Prop 13. End government waste. Why let THEM spend the money you could be using to clean YOUR OWN bathroom.

That's one of those fun things to disagree with because building equity in your primary residence should be an investment. If you don't look at owning at house as an investment, then what's the point of buying it?

Likewise, if someone is buying a house for the long term it should be with the goal of paying it off and having a comfortable retirement. If the deal has someone paying payments indefinitely that is just as bad as renting forever.

The ideal situation for the up and coming JBRs is for the job market to remain reasonably strong, while house prices crash. Unfortunately I don’t see both happening because the economy HAS to slow with a painful housing contraction.

The ideal situation is for one to buy a 2 million dollar house outright with less than 1% of his net worth. :-P

I kid. I kid.

The best case scenario for everybody is a flat housing market and a steady job market.

And this is what all the masses are clammoring to send their kids to?

My favorite is when local parents tell me that Monta Vista/Gunn is "the best high school".

Unfortunately they forget to qualify it with "Bay Area" or "California".

I went to a Top 25 ranked high school in the East Coast. I'm simply shocked and appalled at what they consider to be schools here.

Of course, as Allah points out, in places that have good schools, like Long Island, the property tax tends to be $12k on a $800k house. Youch.

Or I guess one can say the stability of a fixed rate mortgage has a break even point of increasing rent outlays. I still would assert that the goal is to own the house outright even if it is not the economically optimum use of the equity. Emotional security has an intangible value in my opinion.

Support Prop 13. End government waste. Why let THEM spend the money you could be using to clean YOUR OWN bathroom.

No. Scrapping property tax is a better way to end government waste. Much of the government should be privatized anyway.

But it is past the point of being able to remain flat. Even flat for the fundamentals to catch up is a catastrophe that can't be sustained. It has to fall to the fundamental valuation.

My favorite is when local parents tell me that Monta Vista/Gunn is “the best high school”.

And the best high school will certainly propel every of its graduates into the US Senate. We are going to have so many senators.

Just let the delusional parents live in their pipe dreams. Though someone should tell them they can have cartoon kids in the virtual world for a fraction of the cost.

It is possible that the ‘majority’ are like that. However, there are a large number of recent (2004-2007) buyers in the prime areas who are skating on very thin ice. They need
1. two high payin jobs
2. two bonuses
3. low interest rates and
4. continued appreciation
in order to keep them from going underwater.

I absolutely agree with this. I elaborated this a little in the very last part of that post. I think most of us are really on the same page. We have some very good unemotional macro-economists here.

Those prime guys will default at a rate that approximates changes in those factors that SP lays out.

What it boils down to is still the job market. Almost all the professional couples I know who got into a home in the last few years locked in fixed rates, so higher rates won't affect them. However, since they are so stretched financially, they are living from paycheck to paycheck with little cushion saved up. Most of their savings from previous years went straight to the dp.

If one of them get laid off and can't find a comparable job within 3-4 months, these prime areas will really start to crumble. But as long as the job market is holding up, no worries so far.

OMG SP, they would have ridiculed anyone who dared throw that number out there last year.

The housing market downturn WILL eventually affect the job market.

Michelle Mangione knows. She and her husband, Jeff Haag, are living in a home in Fallbrook, Calif., that she bought from the owner about three years ago, just before it went into foreclosure. Having paid about $680,000, she estimates she saved about $200,000

ARE THEY ON CRACK? Have any of you been to Fallbrook? $680 is not a bargain there. You can get very good homes in prime N Co San Diego for that much.

No Co coastal homes like Carlsbad, Encinitas, La Costa.

I'm telling you, what I am seeing in NM is a preview of what is coming. Entire towns boarded up, $900/acre signs and flyers. This is an area that should have been insulated.

$900/acre signs

Condos in SF are still being sold for that much per square foot. :(

$900/acre, hmmm, sounds like my dream price.

I will be perfectly happy with $90K a flat acre in the western foothills. I just don't think the market will crash this much.

years locked in fixed rates, so higher rates won’t affect them.

There is a danger when the owners think this way. In the big picture, it's not the rate you are paying that matters, it's the rate a future buyer will pay that matters to the seller. I would much rather buy a house at a low price and extremely high rate than buy at a very expensive price with the guise that the rate is low and my payment is the same. Those realtors who actually tell people that should put in blocks in the town square and made a spectacle.

No, I doubt 900/acre in prime SF or SD but I haven't heard of land that cheap ever. This isn't crappy land either, these are ranches near Soccoro, and on the outskirts of Roswell which I think is going to be up and coming in the future. Even if I were wrong, how badly can you get hurt paying $900/acre? I might buy some just to play the resell with owner financing at 12% game.

I will be perfectly happy with $90K a flat acre in the western foothills. I just don’t think the market will crash this much.

I am perfectly happy with $90K a flat 1/4 acre in a safe neighborhood with utility hookups.

These lots actually have utilities!

But I gotta say, who the hell would want to live out here?

I do not want to deal with septic tanks.

You know what kids do for fun? We talked to this young girl in a store who told us the main passtime apart from getting high is rabbit whacking.

A bunch of kids ride in a pickup truck with baseball bats, and one with a flashlight. When the see a rabbit the jump out, surround it, and whack it.

Well, if one is buying a home for occupation, and he can afford to ride it out, then rate fluctuations doesn't matter that much, because throughout 30 years, you will see rates going up and down. You are assuming that these buyers will have to move, what if they choose to stick it out in the BA?

It is hard to time your purchase. Of course buying from any time 2004-now is just dumb, but buying in 1999? 2001? Hard to say, because after all, housing is a consumption need. After all, there is always a premium of ownership to renting, just that the premium has gotten entirely out of whack in the last few years.

For those people who have enough cushion to ride it out after locking down a good rate, even though they didn't buy their home at the best possible price, it is still a viable decision. You can't hold out for the best possible price for everything in life, sometimes it is a compromise.

There's worse things than septic tanks but who wants to live on top or next to their own feces?

A bunch of kids ride in a pickup truck with baseball bats, and one with a flashlight. When the see a rabbit the jump out, surround it, and whack it

Yuck.

I am pro-hunting meat-eater. But killing rabbits with baseball bats is just too cruel. Are they at least going to eat the rabbit?

Normally in the long term you could ride out overpaying, but when you overpay by 200%, that is many years of hating life to enjoy that premium.

You can’t hold out for the best possible price for everything in life, sometimes it is a compromise.

Of course.

Normally in the long term you could ride out overpaying, but when you overpay by 200%, that is many years of hating life to enjoy that premium.

Human mind is a powerful entity. Homeowners will invent mind games to delude themselves into pure bliss.

There is also some realtwhore in the article who says “now is a good time to buy”. In Detroit, no less.

To be honest... buying in Detroit right now wouldn't suck, assuming you wanted to live there. The houses can be had for 20k.

I went to a Top 25 ranked high school in the East Coast. I’m simply shocked and appalled at what they consider to be schools here.

Yeah, California used to have good schools, but that was before Prop 13 gutted the tax support for them. Not very surprisingly, if you are not willing to invest money in something, it eventually falls apart.

I think California should have fully-taxed Casinos. Gambling can fund many things.

Back to the topic, a 750K run-down SFH with a decent lot (1/4 acre in the burb) is infinitely better than a brand new townhome. It is all about the land.

Condo is just the worst, the $400 monthly condo fee is not tax deductible, and shoots up faster than inflation.

Of course, the best is just $750K multi-acre dirt in a prime location with no structure on it. But the market may not value it this way, although I personally find much more comfort with dirt than any structure.