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Falling prices trap new homebuyers
The Orange County Register ^ | December 13, 2006 | JEFF COLLINS

Posted on 12/13/2006 4:40:07 AM PST by GodGunsGuts

Wednesday, December 13, 2006

Falling prices trap new homebuyers

Neighbors in a new Garden Grove tract say a developer's plan to slash prices by about $140,000 has left them owing more for their homes than they're now worth.

By JEFF COLLINS

The Orange County Register

(Excerpt) Read more at ocregister.com ...


TOPICS: Business/Economy; Culture/Society; Extended News; News/Current Events
KEYWORDS: bubble; depression; despair; doom; dustbowl; grapesofwrath; housing; housingbubble; iluvwilliegreen; imtomjoad; prop13rules; realestate; schadenfreude; wearealltoast
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1 posted on 12/13/2006 4:40:14 AM PST by GodGunsGuts
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To: GodGunsGuts

Bump for reference. Prices still dropping here in Texas. Never thought I'd see it.


2 posted on 12/13/2006 4:42:02 AM PST by MeneMeneTekelUpharsin (Freedom is the freedom to discipline yourself so others don't have to do it for you.)
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To: GodGunsGuts

" owing more for their homes than they're now worth. "

Everybody who didn't see this coming, raise your hands..

(I'm talking to *YOU*, Cavuto - and your gaggle of head-in-the-sand pollyanas)


3 posted on 12/13/2006 4:43:24 AM PST by Uncle Ike ("Tripping over the lines connecting all of the dots"... [FReeper Pinz-n-needlez])
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To: GodGunsGuts

Buy High, Sell Low! That's my motto!

PS. What your home is worth today is irrelevant unless you sell it today.


4 posted on 12/13/2006 4:43:43 AM PST by bondjamesbond (Many Americans are invested in a US failure in Iraq, and will work diligently to bring it about.)
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To: ex-Texan; RobRoy; durasell; winodog; expat_panama; djf; simon says what; headsonpikes; ...

All the realtors that said this couldn't happen in Orange County were quite simply wrong...


5 posted on 12/13/2006 4:44:39 AM PST by GodGunsGuts
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To: bondjamesbond

Yep.


6 posted on 12/13/2006 4:45:29 AM PST by GodGunsGuts
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To: GodGunsGuts

If they were in the market in order to flip the house, tough cookies. They had a hand in driving up the price to ridiculous levels. If they bought the house as a long-term residence, so what? Assuming they could afford the payments for what they bought, all they ned to do is wait for the market to cycle through the dip. Meanwhile, demand a break on property taxes.


7 posted on 12/13/2006 4:46:17 AM PST by NonValueAdded (Prayers for our patriot brother, 68-69TonkinGulfYachtClub. Brian, we're all pulling for you!)
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To: Uncle Ike

LOL! To be fair, he did have on a few people here and there who said housing was going to tank. But not many.


8 posted on 12/13/2006 4:46:42 AM PST by GodGunsGuts
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To: GodGunsGuts

Typical entitlement mentality. Now someone else should foot the bill for their buying a 100% financed home with an exotic mortgage in a falling market.


9 posted on 12/13/2006 4:47:29 AM PST by ktupper
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To: GodGunsGuts

$870,000 for that house? You could score something like that for 1/4 the price on the east coast. I can see appraisers in that area getting their butts chewed by the loan officers and realtors when appraisals start coming in significantly below sales prices.

10 posted on 12/13/2006 4:47:50 AM PST by Rb ver. 2.0
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To: GodGunsGuts

Democrats in Congress will have a plan for dealing with this.


11 posted on 12/13/2006 4:48:31 AM PST by Steely Tom
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To: bondjamesbond
PS. What your home is worth today is irrelevant unless you sell it today.

Better duck. There are plenty of FReepers that will tell you equity is money in the bank. Heck, even the govt. includes that in your "household worth". Too many people think equity is concrete.

12 posted on 12/13/2006 4:48:48 AM PST by raybbr (You think it's bad now - wait till the anchor babies start to vote.)
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To: MeneMeneTekelUpharsin
California home prices have been way out of control. Time for a correction.

A home that we paid 15,000 for in 1966 is now going for over half a million. Even with inflation this is absurd.
13 posted on 12/13/2006 4:49:28 AM PST by Coldwater Creek (The TERRORIST are the ones who won the midterm elections!)
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To: Uncle Ike
Everybody who didn't see this coming, raise your hands..

But...but...but... Everybody needs a place to live! So Somebody is going to have to come along and buy my Cape Cod on an eighth acre for $950,000!

14 posted on 12/13/2006 4:49:32 AM PST by bondjamesbond (Many Americans are invested in a US failure in Iraq, and will work diligently to bring it about.)
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To: GodGunsGuts

You could see this coming from a mile away.


15 posted on 12/13/2006 4:50:07 AM PST by sgtbono2002 (The fourth estate is a fifth column.)
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To: Rb ver. 2.0

And one-sixth in the midwest.


16 posted on 12/13/2006 4:50:58 AM PST by RockinRight (Barack Hussein Obama, Jr. He's a Socialist. And unqualified.)
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To: mariabush
That will give you plenty of shopping options back east even if you can't buy squat in California.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

17 posted on 12/13/2006 4:51:20 AM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives On In My Heart Forever)
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To: Rb ver. 2.0

There will plenty of finger pointing (and worse) to go around before this is all over.


18 posted on 12/13/2006 4:51:54 AM PST by GodGunsGuts
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To: bondjamesbond

" PS. What your home is worth today is irrelevant unless you sell it today. "

The current value of your home is very relevant to the bank that actually owns it.

When all of those "creative" mortgages come to their balloon or higher-payments points, and people find out that they can't refinance, (as promised as a 'selling point') and can't sell, and can't make the payments --

Can you say "Banking Crisis"? (Hint -- the S&L bailout was a sandbox game compared to what could happen, here)....


19 posted on 12/13/2006 4:53:16 AM PST by Uncle Ike ("Tripping over the lines connecting all of the dots"... [FReeper Pinz-n-needlez])
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To: Uncle Ike

yep..... and I noticed it's not thier fault. It's the developer's fault. It's always somebody elses fault.


20 posted on 12/13/2006 4:53:41 AM PST by kjam22 (see my band here.. http://www.youtube.com/watch?v=cRCcdHCBTEs)
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To: bondjamesbond

With one exception: what your home is worth today is relevant if you were intending to refinance in the near future.

Of course, refinancing is a form of selling your home. In effect, you sell it to the new lender and pay off the old lender.

If a house no longer appraises at a certain value, the owner's ability to refinance his mortgage is limited by that lower valuation.


21 posted on 12/13/2006 4:53:53 AM PST by wouldntbprudent (If you can: Contribute more (babies) to the next generation of God-fearing American Patriots!)
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To: GodGunsGuts

Same as in some parts of northern Virginia (e.g. western Prince William County). Some home prices are off $100-200K from last year.


22 posted on 12/13/2006 4:54:58 AM PST by wouldntbprudent (If you can: Contribute more (babies) to the next generation of God-fearing American Patriots!)
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To: MeneMeneTekelUpharsin

Georgia is still strong (Atlanta area). However, when I buy my new house in the spring, I am going to buy a house we can afford on one salary.


23 posted on 12/13/2006 4:55:37 AM PST by nyconse
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To: GodGunsGuts
The title of this article is a bit misleading; it should read "Falling prices trap recent homebuyers."

Remember the old saw about the stock market? "In every transaction there's a buyer and a seller ... and they both believe they got a good deal."

New homebuyers like us, on the other hand, are doing just fine, thank you. We're closing on a house this week at $10,500 under appraisal on a fixed 6.5% mortgage. The seller is selling below his cost, but that's not our problem, is it? [Our local market is far below either coast, so $10,000 under appraisal is a pretty good deal.]

24 posted on 12/13/2006 4:56:24 AM PST by logos
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To: GodGunsGuts
The housing market has been overvalued in some parts of the country so right now we're seeing a price correction under way. I doubt you'll ever see million dollar middle class homes... no one could afford to even live in them.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

25 posted on 12/13/2006 4:56:24 AM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives On In My Heart Forever)
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To: GodGunsGuts

Toll Brothers hasn't dropped prices in NJ. In fact, they have increased the prices from $500,000 to $800,000 in the last 3 years.. On the same models in the same towns...


26 posted on 12/13/2006 4:57:29 AM PST by divine_moment_of_facts ("So, I put on some tangerine lip gloss and answered the door.. I was one lucky woman.")
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To: logos

That's great news for you. Just remember, housing will fall a lot further before this is all over.


27 posted on 12/13/2006 4:58:23 AM PST by GodGunsGuts
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To: GodGunsGuts

for later


28 posted on 12/13/2006 5:00:19 AM PST by RayStacy
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To: Uncle Ike
They'll walk away from the mortgage... but before that happens, lenders will bust their ass to keep their customers happy. Lenders know if they are unreasonable, they'll face a loss selling on foreclosure. So they'll work out terms with their clients since a lower price still brings in a profit. Its better than a write off on the property in a tight market. So they'll be willing to accept terms they'd refuse to even consider under normal circumstances. And these circumstances are anything but normal.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

29 posted on 12/13/2006 5:00:23 AM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives On In My Heart Forever)
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To: bondjamesbond
PS. What your home is worth today is irrelevant unless you sell it today.

While that may be true on a micro level, there are series implications on the macro level. The first one that comes to mind is the home equity market. For better or for worse, many people tap into their home equity to pay for college educations, vacations, home improvements, and consumer goods. Pulling that money out of the economy will have a ripple effect.

30 posted on 12/13/2006 5:01:37 AM PST by Labyrinthos
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To: GodGunsGuts

Moral of this story,if you've got money to buy a house,DO NOT BUY WHEN INTEREST RATES ARE LOW. Sit back wait till they go up,the higher the better and save abot 100-200k on the purchase.Pay the higher rates till the goofball Federal Reserve starts dropping rates because for some reason they never seem to be able to leave them alone,and refinance at the lower rate !!!


31 posted on 12/13/2006 5:01:38 AM PST by Obie Wan
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To: Rb ver. 2.0
Not really caring about the price they paid for it, but that appears to be a big house. If they are complaining, maybe they should of bought a smaller house. I can't stand people who complain about their mortgage payments on a house that is bigger than 2,000 s.f. Not saying that they shouldn't own a house bigger than that, but its like people who complain about the cost of ownership of a Hummer H1. If you can't afford it in the first place, then don't buy it to begin with.
32 posted on 12/13/2006 5:02:09 AM PST by neb52
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To: raybbr
Better duck. There are plenty of FReepers that will tell you equity is money in the bank.

Actually, it's more like money in the stock market. A house is worth exactly what someone else is willing to pay for it. If one considers their home more in terms of a speculative investment than a place to live, one runs the risk of any speculator.

Not so with money "in the bank". It doesn't gain value like a hot stock or a beach house in Malibu, but it doesn't evaporate overnight either.

33 posted on 12/13/2006 5:03:47 AM PST by Kenton (Hell yes, I can drink muh beer while I drive in a a circle. I do it all the time in the winter...)
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To: GodGunsGuts
Neighbors in a new Garden Grove tract say a developer's plan to slash prices by about $140,000 has left them owing more for their homes than they're now worth.

Just ouch!

34 posted on 12/13/2006 5:05:21 AM PST by Kenton (Hell yes, I can drink muh beer while I drive in a a circle. I do it all the time in the winter...)
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To: GodGunsGuts

It's not happening in CT. No bargain hunting here.


35 posted on 12/13/2006 5:05:29 AM PST by Fierce Allegiance (SAY NO TO RUDY!)
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To: GodGunsGuts
Just remember, housing will fall a lot further before this is all over.

Of course it will. And one day, when it stops falling, it'll begin rising again.

Since this is very likely the last home we'll ever buy - and only a deep depression would affect our ability to make the mortgage payments - we're not too concerned.

As far as I'm concerned, investments are investments and necessities are necessities. It's nice when a necessity appreciates in value, but it's not wise to buy it with appreciation in mind ... or even worse, counted as a certainty.

And btw, I play poker the same way; I never carry more money into a game than I can afford to lose. When it's gone, the game's over for me. :)

36 posted on 12/13/2006 5:06:26 AM PST by logos
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To: divine_moment_of_facts
Toll Brothers hasn't dropped prices in NJ. In fact, they have increased the prices from $500,000 to $800,000 in the last 3 years.. On the same models in the same towns...

Yes, but the fear-mongers have one development where the developer is in serious trouble and they making sweeping conclusions based on that. It is terrible what happened in this neighborhood and the impact on surrounding subdivisions, but this in no way represents the national picture.

37 posted on 12/13/2006 5:06:29 AM PST by Always Right
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To: GodGunsGuts

Prices in New York are rising again, because (a) it's New York, (b) inventory levels finally dropped off due to the balance shifting to rental unit development.


38 posted on 12/13/2006 5:07:02 AM PST by montag813
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To: Kenton

Exactly. And it will turn into more than just an "ouch" as this thing spreads. I feel sorry for all those people who rushed to buy because this "could be our last chance to buy" at low interest rates. They forgot about the other side of the equation.


39 posted on 12/13/2006 5:07:26 AM PST by GodGunsGuts
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To: nyconse

You're very wise to do that. When my husband and I bought 8 years ago, we bought a house based on the one income scenario.
Two years later, I became very ill and had to quit work permanently. Had we bought what we could afford at the time, we would be out on the street. You never know.


40 posted on 12/13/2006 5:07:49 AM PST by duffi
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To: GodGunsGuts

So a small development had to lower prices to sell their last few homes. That's hardly a story of national significance.


41 posted on 12/13/2006 5:09:05 AM PST by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: NonValueAdded
If they were in the market in order to flip the house, tough cookies.

That San Antonio family of flippers on "Flip this House" are doing very well. Saw one house last week they bought and renovated for $80k and sold for $140 17 days later via a front-yard auction. Incredible.

42 posted on 12/13/2006 5:09:10 AM PST by montag813
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To: RockinRight
And one-sixth in the midwest.

But then you have to actually live in the midwest.

-New York Snob

43 posted on 12/13/2006 5:10:01 AM PST by montag813
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To: raybbr
Real Asset Value (RAV)= The actual price you can sell it for when forced to or in a pinch.

Up until 1982, when the Texas oil depression occurred, I was fat, dumb, and happy with the belief that the valuation of my business and personal assets were worth what normally would be accepted as a good appraised value.  Then, when the dark cloud of the "Texas oil depression" hit in 1982, I suddenly learned a lesson about RAV.  I now think that a whole lot more people are "fixin" to learn the painful formula too.

This formula is not taught in any University or College.  It is only taught at "the school of hard knocks."  Once learned, the lesson will never be forgotten.  (Compare it to sticking your finger in the fire.)  It has guided every financial decision and evaluation that I have made since 1982.

I feel that in the short future, a whole lot of people will learn the formula when they try to liquidate assets at the value they think they are worth when actually, the buyer will set the value by actually purchasing it at "fire sale" prices.

44 posted on 12/13/2006 5:10:49 AM PST by DH (The government writes no bill that does not line the pockets of special interests.)
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To: Steely Tom
Democrats in Congress will have a plan for dealing with this

They will have a senate hearing with photo ops and speeches while they pretend to tear into the big shot developers and realtors that are stealing everyone's money. Harry Reed will chair this hearing.

45 posted on 12/13/2006 5:11:14 AM PST by Dixie Yooper (Ephesians 6:11)
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To: divine_moment_of_facts
Toll Brothers hasn't dropped prices in NJ. In fact, they have increased the prices from $500,000 to $800,000 in the last 3 years.

But are they SELLING? I see prices dropping like a rock all over Bergen Cty.

46 posted on 12/13/2006 5:11:23 AM PST by montag813
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To: bondjamesbond
PS. What your home is worth today is irrelevant unless you sell it today.

If your home is assessed at more than it's worth you will pay more in taxes than you should.

47 posted on 12/13/2006 5:11:30 AM PST by Tribune7 (Conservatives hold bad behavior against their leaders. Dims don't.)
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To: bondjamesbond
Wish the county tax assessors and the government would be in line with you P.S. statement. Across the nation, tax assessors and the gov have decide that homes are worth more than what they usually sell for. In Franklin Co., NC, we have 'drive-by' picture assessments. Funny thing, how much is a home really worth if it's trashed inside and in dire need of repair and maintenance? This is never taken into account for tax purposes.
48 posted on 12/13/2006 5:11:50 AM PST by RSmithOpt (Liberalism: Highway to Hell)
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To: Fierce Allegiance
It's not happening in CT. No bargain hunting here.

I see houses that have been on the market for nearly a year in CT in places like Bethany, Ansonia and Woodbridge. In Milford they go fast.

49 posted on 12/13/2006 5:13:15 AM PST by montag813
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To: GodGunsGuts
I've lived in the same house since 1976, and it's long since paid for. It's worth about 4 times what I paid for it.

I'm retiring next year, maybe prices on housing will be affordable just at the time I'm considering becoming a "snow-bird" to flee from these Ohio winters.

I guess how this affects you depends on where you are in your life more than anything else.

50 posted on 12/13/2006 5:14:06 AM PST by Kenton
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