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New Home Sales Plunge 17% - Most In 4 Years
- Thread starter ByLoSellHi
- Start date
I believe the trend you'll see in new home sales will be a stabilzation of the prices but a faster decrease in sales, why: more comps to keep up prices and higher % of sales on the upper end as tighter lending standards are phasing out new/marginal home buyers
Quote from ByLoSellHi:
He also left out carrying costs, which realtors always do.
Property taxes, insurance and maintenance can add up to anywhere from 3,000 to 30,000 per year.
good point..and i think they may have to address this in the future..the guy in that example pays taxes based on 175k purchase price...the guy who may want to buy his house at 400k has to pay based on that...his taxes will be double the original and that can increase you monthly payment by 400.00 or more.
if this thing really gets bad, local gov't's may have reduce taxes to spur home sales or at least make a compromise.
Quote from TM_Direct:
You have a valid point...but you leave out a BIG key to this..
A guy buys a home for 175k in 1998...in 2004, he takes out 150k in equity to buy a great investment peice on the other side of town...he then takes out 50k to 'consolidate' his debt.....now in 2007, the ARMs are raised dramatically on the 200k he took out so he has to sell...in order to make what he wants he lists it at 400k last fall....but thousands of other homes are out there as well...so he waits...and waits...and all the while, the value is going down and the banks raise the ARMs and he can't afford the payment....so he drastically reduces the price ..and waits..and waits .....ya get the picture? forclosures are sky rocketing for a reason.
OK, so he bought the house for $175K in 1998. Ignoring downpayments, he paid that note down about $6K, so he owes $169K. All that time, he must have lived like a grasshopper to pay it down so little...expensive cars and vacations. In 2004, he taks on another $200K to buy an investment property and finance even more of his indulgent lifestyle. By 2007, his note is about $360K after paying it down a few more years. And, he bought an investment property which was purchased for $150K in 2004 so it probably was worth about $225K at the peak of the market and is worth about $180K now.
So the guys has lead an indulgent lifestyle since 1998, and assuming he sells his house for $360K (which you would characterize as a loss?), he still owns an investment property worth about $180K free and clear?
You want me to feel sorry for him?
Quiz question...how much would he have to put away every month in his IRA, growing at 8% a year to build up $180K?
SM
well you made a lot of assumptions again...like he made money on his investment...why? do your realize how screwed the cond market is? in Orlando there is 41 condo projects under contract but only 15 are in progress and there's talk that they may be stopping 7 of them because the people are backing out and or they cannot sell them....Look, during the internet bubble, there were plenty of guys who bot ___.com at 10.00 and sold it for 200.00 but at the end, the bubble blew up and took alot of investors down with it.
Quote from TM_Direct:
well you made a lot of assumptions again...like he made money on his investment...why? do your realize how screwed the cond market is? in Orlando there is 41 condo projects under contract but only 15 are in progress and there's talk that they may be stopping 7 of them because the people are backing out and or they cannot sell them....Look, during the internet bubble, there were plenty of guys who bot ___.com at 10.00 and sold it for 200.00 but at the end, the bubble blew up and took alot of investors down with it.
The investment property he bought was roughly half the value of his house at the time. I assumed he bought it free and clear for $150K. If he used that money to make a 50% down payment, his money was leveraged (poorly), and he bought a $300K house. At the peak of the market, it would have been worth about $450K, and now it might be worth around $400K...but lets say, $350K. So he sells for $350K, yet he owes about $146K now, so he's gained $204K in equity due to the miracle of leverage. He's actually better off! And if he's only got a $150K note, his payment is ridiculously low...so he can just weather the storm by renting it and picking up cash flow too.
Guys like me went out and used our equity to buy several townhouses, and used fixed rate mortgages. I can afford to rent them for way less than market rate, and I have loads of equity like the example above. By my childhood definition, it made me "rich", and I laugh that someone said I'm suffering now because I own all these townhouses. Like any investing, you have to put in stop losses. I have no sympathy for people who contract poorly, live like grasshoppers and then want a bail out.
SM
People on this board are in love with the notion of financial collapse.