Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up.If you bought a house at the height of the boom, say 2004-2007, depending on where you live, you might be screwed forever.
“People shouldn’t look at a home as a way to make money because it won’t,” Mr. Baker said.
The housing boom began in the late 1990s and despite ample evidence by 2003 (at the very latest) that the housing market had become a bubble market, the Federal Reserve (Alan Greenspan) and the Administration (George W. Bush) not only sat on their hands, they cheered on the expansion of the bubble.[1]
The warning flags were not terribly subtle for anyone who cared to study on the matter. What was going on with the subprime mortgage market was rather blatant. But they did nothing to rein in the banksters and cool down the housing market, they just let it go. After all, the banksters and the muckety-mucks in the Federal Reserve and the Bush Administration are not suffering.
It's the American people who were left holding the bag.
[1]Chimpy was a cheerleader in college, at least on the odd days that he was sober.
My strategy of being a lifelong renter is looking okay now.
ReplyDeleteI can't paint walls or plant gardens or play music very loud, but I don't have to worry about property taxes and appliances failing and foundation cracks and insects and liability.
I can up and move with very little warning.
Sure, I've been 'throwing all that money away,' but what was I going to do with the money from am house sale, except buy another house?
Ownership is an illusion. I'm not immortal.
This is a "depends" thing. Some areas are still growing but at reduced rate.
ReplyDeleteOther and I add most are receding at an alarming rate. Its a matter of what you paid and what you've paid in to the loan and current market value.
For example if you bought in the 80s
and didn't keep taking out the equity
your close to pay off and the resale value is likely near twice or better what you paid.
However there are pockets where people bought recently like the last 15 years. They paid high, values have increased but current market conditions means the value is likely at or possible below what you paid.
But if you closer to the 15 years
you have enough equity or money paid in to make it yours and a ok deal.
However if you bought less than 10 years ago and balloon or jumbo mortgage and less than 10% down and your on the wrong side of the curve.
Likely the house will sell today for less than what you paid. You have been or will be hit with the interest
lump or real part of the loan. Loose a job and your up the creek without a paddle.
We can blame the economy but if you bought as much as you could afford and nothing or very little down and overloaded payments.. well it's not like you didn't know you were taking a chance that things would go well.
Bad news they didn't.
Owning house and property is still a good deal. Right now there is plenty on the market at likely prices that are a real value to purchase. If you can qualify for a traditional laon with more than 10% plus closing costs down it's a good thing.
House can be investment, if you buy low, sell higher and the cost of money was reasonable. Traditionally
thats taken at last 15 years or doing major renovation to a old house rather than the highly inflated market has seen.
I'll repeat this. Houses do NOT increase in value by just existing. They and the property must be improved and jobs, schools and reasonable taxes for services must exist or it's just a building no one wants.
Eck!
I got pretty damn lucky.
ReplyDeleteBought in CT in 2000, sold that house and bought another in NY in '05, but used the proceeds from the sale to lessen the mortgage (as opposed to feeding a spending/lifestyle upgrade spree), whatever value my current home may have lost was paid for by the unrealistic value build-up in the CT home.
Dave
Just curious...is "僅英語" Chinese for "turkey vultures' dinner"? :)
ReplyDeleteI paid off my house before the crash. So my frame of reference is a trade -- one house for another. The only serious reason to move (there are several unserious reasons) is to get away from the approaching urban sprawl. But if that isn't coming...I'm good.
Don Brown
Don, The Chinese came from my co-blogger on Two in the Heart, One in the Head. It essentially means "English only, please. Chinese comments will be deleted."
ReplyDeleteNobody really knows what impact the baby boomers will have in the next 5 years when most will be retiring. Already we see them buying up foreclosures here in Florida, waiting for their house to sell up north. But 1.4 million is a ton of folks heading our way which is the current prediction. That much demand will drive up prices. It is why wealthy people bought up all the new construction on the beach for a song. I Know. I sold a ton of it. This has been my biggest year in Real Estate since 1985.
ReplyDeleteZ&M: my guess is we're going to see a big spike in illnesses (like flu) that hit the elderly in the next few decades- no parasite/symbiote ever passes up a new-found population to infect, and I think the boomers will be more willing to head to the hospital (where all the really bad stuff breeds) to share and obtain new and interesting bacteria/viruses (viri?).
ReplyDeleteDave