I’m in New England, so we’re not that far apart.
Here’s my take on 2008…
This entire real estate bust really got rolling with $200 BILLION in ARM loans re-adjusting for the first time in 2007. I’m not talking about sub-prime, this is about people who purchased homes in 2005-06 with ARM’s because they could not afford to buy any other way.
In 2007… $200 Billion in ARM’S adjusted for the first time. (fuse lit)
Now for the BAD news…
In 2008… $900 BILLION IN ARM’S WILL RE-ADJUST FOR THE FIRST TIME!!! (bomb explodes)
That means 4 1/2 times as many people may see their mortgage payments double or even triple.
The problem is once these loans re-adjust they can’t afford the new payment. Originally the theory was that housing would continue to rise and they could just refi into a conventional mortage.
As we all know, THAT didn’t happen. The reality of the situation is that the prices of their homes actually DROPPED!! THAT is the key here, because prices dropped the home they paid $300,000 in '06 is now worth $225,000. As we all know, there isn’t a bank on earth that is going to loan ANYONE $300,000 on a house that now appraises for $225,000. Add to this, MUCH more stringent lending requirements, a looming recession, and you have a recipe for future price declines WELL INTO 2009 and beyond.
My advice to you is AGGRESSIVELY Price the home and SELL IT.
There is no way in hell that this market does NOT continue to fall throughout 2008. Don’t forget to add in a nice recession which is no doubt on the horizon and you will be doing good if you sell the home for $10,000 less than current ask.
Sorry to be so negative, but reality is reality.
Look whats going on around us. $100/ barrel oil, U.S. dollar at NEVER BEFORE seen lows, and Real Estate deflating by the month.
Believe me when I tell you this…we have not seen even the TIP OF THE ICEBERG when it comes to Wall Streets exposure to the falling real estate market. This sub-prime thing is so bad that NO ONE knows where the bodies are buried. I can tell you this without hesitation. Those bodies are gonna start to stink in 2008. When that happens be prepared…
I’ve been around the block a few times (20+years investing) I have NEVER
seen a housing decline like this that DID NOT bring the entire U.S. economy down with it. Housing is HUGE, it effects COUNTLESS good paying jobs from carpenters, electricians, truck drivers, furniture makers, even car sales. The problem is, these jobs can actually support home ownership, but they are going bye bye. Replacing them with $8/hr WalMart or Home Depot jobs is not going to cut it. It’s a vicious cycle.
I have numerous sub-contractors who have laid off half their help in the last 6 months. These guy’s made $15 to $20/hr ALL of them are at Lowes or Home Depot making between $8 and $10/hr. That isn’t good for anyone.
Pay attention here folks… This is where people get HURT! I’m not talking about the dopes who bought houses they couldn’t afford, with mortgages that made no sense. I’m talking about US! I have seen countless real estate investors lose EVERYTHING because they failed to see or didn’t want to admit the obvious.
Here’s my advice…
If you weren’t buying and selling homes before 1995…YOUR A NEWBIE!!! Think about that for a minute, you could have 12 years experience and you have never seen what we’re ALL about to see. You have invested in a RISING market ONLY!! New ball game now folks.
BE CAREFUL. Don’t get me wrong, there will be TREMENDOUS deals out there. But you better have the bank roll, the plan, and the FINANCING to take advantage of it. Or it WILL, take advantage of YOU.