Posted on 12/13/2006 4:40:07 AM PST by GodGunsGuts
" 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. "
Mmmmm-hmmmm...
... and when profits at lending institutions start to fall dramatically due to these desperate measures, how is Wall Street going to react??
We just may be seeing 1929 in slo-mo...
(And the federal gummint might just try to bail it out, bankrupting the nation in the attempt..)
They have 2 butts?
That all depends...
What are their arguments?
"There are great tax advantages to owning."
FALSE. It is much cheaper to rent a house in the San Francisco Bay Area than it is to own that same house, even with the deductibility of mortgage interest figured in. It is possible to rent a good house for $1800/month. That same house would cost about $700,000. Assume 6% interest, and we can see that a buyer loses at least $4,936 per month by buying. Renting is a loss of course, but buying is a much bigger loss.
Renting:
Rent: $1,800
Monthly Loss: $1,800
Buying:
Property Tax: $486 ($729 per month at 1.25% before deduction, $486 lost after deduction.)
Interest: $2,333 ($3500 per month at 6% before deduction, $2333 lost after deduction.)
Other Costs: $450 (Insurance, maintenance, long commute, etc.)
Principal loss: $1,667 (Modest 3% yearly loss on $700,000. Reality will be much worse.)
Monthly Loss: $4,936
This is a very conservative estimate of the loss from owning per month. If you include a realistic decline in house prices, as in this rent-vs-own calculator, you'll see that owning right now is a very poor choice. Here's a more optimistic calculator which ignores price changes entirely. House value losses will stop eventually, but it could take 5 or 10 years to bottom out.
Remember that buyers do not deduct interest from income tax; they deduct interest from taxable income. Interest is paid in real pre-tax dollars that buyers suffered to earn. That money is really entirely gone, even if the buyer didn't pay income tax on those dollars before spending them on mortgage interest.
Buyers do not get interest back at tax time. If a buyer gets an income tax refund, that's just because he overpaid his taxes, giving the government an interest-free loan. The rest of us are grateful.
If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc. It is now much cheaper to rent the house than to rent the money.
There are large tax disadvanges to buying in California. Because of Proposition 13, it is common for new buyers to pay ten times the property tax that their neighbors pay. Tax rates are set at the time of purchase, which means those who bought long ago pay nearly nothing, and the new buyers pay all property tax for everyone else. Upgrading houses makes you a newcomer all over again.
http://patrick.net/housing/crash.html
" They have 2 butts? "
each...
;~)
The house I sold 10 years ago in Mission Viejo (CA) for $210K sold last summer resold for $800K.
That house in a modest neighborhood in North Georgia would also be no more than 1/4 that price, and would come with a much, much bigger yard.
Milford has a bazillion houses on the market.
My comment was more isloated to th town I live in. Stuff priced fairly moves fast, but people seemt to still be asking the same or more as they were at any other time. Maybe a miniscule dip in prices, but nothing significant like the doom&gloomers here try to claim.
Want to see something even more incredible in NC? Go to the mountains around Boone, Blowing Rock, Asheville and West Jefferson. RTP ain't sh$t in land / home value increases.
"The title of this article is a bit misleading; it should read "Falling prices trap recent homebuyers."
You are correct!
Not in NJ either, unless you're looking for a "bargain" on a McMansion. Nothing under 400k is going to come down significantly here.
A developers plan to slash prices=He simply added over 200 grand onto the cost of building the thing when they got done building.
There are developers here that added over 100% on the top of their new home construction and are now sitting on well over 1500 homes. I hope they go belly up.
Look here..it cost around 95 to 100 dollars a sq foot to put up a house. So do the math.
The people who got caught in this probably have 98% Debt to Purchase Price mortgages, and may have used their Google stock to secure the loan.
That is a problem with your local politicians, grabbing more tax money than they should. You really should take that up with your local politicians.
Beginning to look like a great opportunity to buy??
Pray for W and Our Troops
Japan's problem was a huge amount of non-performing loans which were never written off. Therefore, the comparison isn't valid.
Nice conservative sentiment. Do you support government price controls, too, because you sure don't seem to believe in market economies.
I used to challenge raises in appraisals every year they went up and I'd spend nights and weekends searching comparables and checking around the immediate vicinity. They are expecting you to bend over and take it and if you do your homework you can gain from it. There are laws in many states that require reassessments when more than a certain percentage of assessments are challenged. I think homeowners as a matter of course should challenge every year just on principle.
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