Goodbye, Home Equity
Nov 29th, 2007 at 11:03 am by Susie
I’m so glad I live in a cash world. I’m better prepared than most to handle what promises to be a very long, deep recession. (They used to call it a depression…)
The median price for an existing home plunged by a record 5.1% in October, shrinking values back to March 2005 levels, as many buyers struggled to get financing, the National Association of Realtors said Wednesday.
The median price for an existing home now stands at $207,800. What’s more, further declines probably lie ahead. So far this month, even more sellers have cut asking prices in cities including Miami, San Francisco, San Diego and Washington, according to an analysis for USA TODAY by ZipRealty.
Sales of existing homes dipped 1.2% from September to October to a 4.97 million pace, driven by condo sales, which tanked 9.1%. Compared with October last year, sales of single-family homes and condos sank by nearly 21%.
“That light at the end of the housing-meltdown tunnel appears to be an oncoming train,” says Joel Naroff, president of Naroff Economic Advisors. “With so many choices and so few buyers, the median sales price is cratering.”
Nearly 11 months’ worth of homes are crowding the market, and Adam York, economic analyst at Wachovia, says he expects it’ll take up to three years to work through that glut of homes, depending on how quickly prices continue to fall.
The problem is twofold: Buyers with poor credit and little money for a down payment have fewer options now to get a mortgage. And many of those who need to borrow more than $417,000 - a so-called jumbo loan - are being squeezed out by higher interest rates.
I am SO glad I bought when I did, and paid as little as i did.
And since I expect to be in Philadelphia for at least 5 more years (as much as seven perhaps), I should be able to weather this fairly well.
I don’t think Philly is going to be hit as bad as some other parts of the country, either. Philly was almost criminally undervalued as recently as 5 years ago. We had a bit of a perfect storm in that the mortgage market loosening happened at the same time that large sections of the city (the former Rappaport properties in Society Hill and Center City and the properties in Old City sold by Special Master in a business dispute between two partners) opened for development at the same time. But even given that, I can’t see more than a 10 or 15% drop in prices. Which is nothing, given that I can point to actual buildings that have increased in value 500% or more over the last 10 years.
Lionel,
this time of year is the slowest time of year too so the problems are going to be amplified. We really have to wait until March (spring) to see what kind of an effect this has on the tri-state area (Del, Pa, NJ)
Mortgage resets will continue in earnest through JUNE 2012.
Not a typo: JUNE 2012.
Shouldn’t be much wealth left after that, besides, by then we’ll be firmly inside the bumpy plateau: http://www.theoildrum.com/story/2006/3/14/134941/956
After that, it’s all downhill. No more economic expansion, just contraction. Never seen or imagined in any of our lifetimes.
Google mortgage reset schedule and you find this: http://solidquant.com/node/51
We’re only in the bottom of the first inning of a bad, bad game that will last for 65 months. Move to a farm. Now.
If you think we might be headed for a depression, you might be interested in this. I know the guy who makes them, too - so I might be able to get him to cut you a deal. Especially if you can convinvce others to get one, too…
I think reading about a depression causes depression.
The husband has all his money in stocks. I keep telling him, he keeps saying no, baby, stocks always go up and down. In the long run it’ll be great.
He’s planning to retire in a couple of years. I’m thinking, not so much.
The farm idea is a good one.
so, it’s my understanding though, when the housing market stalls, rents start to skyrocket. it seems to be happening here in philly already. i’ve been expecting a depression for several years now, and it’s coming slower than i anticipated, but i do think it’s coming, and as KO suggested at the end of the interview with naomi klein last night (find that video susie) that could very well be the next shock that brings down the totalitarian hammer for real in this country.