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Saturday, January 16, 2010
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58 comments:
Back to the NoVa boosting.
I spoke briefly with someone who attended an economic meeting in Tyson's yesterday morning. Several industry leaders spoke as well as the people from Mason (Fuller was there as well as their top housing guy).
Charts were displayed showing the tremendous disparity in (business) growth between the 3 regional areas (DC, MD and VA). These charts went back to 1981 and were quite striking, with the Tyson's/Dulles area showing an unbelievable trajectory compared to Mont. Co. and DC.
The forecasts are quite remarkable for the Dulles Corridor on all levels - Office, retail and residential.
Sorry, I was half-asleep and that's about all I got out of the discussion. Perhaps GMU has the charts and forecasts.
Does anyone know the cost and time estimate would be like for installing central A/C and upgrading heating radiator in a small three-level colonial? It appears to be a major major reno work because I guess the walls need to be ripped open first?
MM,
Leave the radiators. Best heat ever! I had a boiler that was old as the hills and worked just fine. I learned how to "bleed" radiators and we only needed a few minor plumbing repairs. You will need duct work for the CAC. Much depends on how this is configured.
Probably best to get a reputable HVAC company in there to est. the CAC cost. I had a huge house (5 bedroom), high ceilings,etc. and the CAC/Air cleaning/humidifier - both 2 zone) cost about 10K, iirc. 3,600 sq ft house not including basement which there is no need to aircondition. This was the highest quality system.
I'd give my right arm for radiators!
MM,
p.s. you may want to look into the ductless systems available and also make sure your system qualifies for the tax credit.
Va_Investor,
Thanks much for the tips on ductless systems (never heard of but will google) and the tax credit!
Btw, I know each house is different but 10K doesn't really sound so bad. I mean a finished basement would cost more than double of that!
Arlington County assessment has arrived too! Please share what you can! Tks!
MM, down 2.02%.
All those tax $ saved will buy a nice stash of pet food.
A couple of weeks' worth, at least.
Oh yeah, I had better not spend it - I'm sure the tax rates will go up enough to offset that value drop!
Seriously, I'm a bit pleased that the precipitous drops Zillow has been emailing me about for so long may not be valid, and that my neighborhood isn't doing any worse than others, since I probably won't be able to find a new place in this neighborhood.
Visited friends in Bethesda recently and thought values there relative to their close proximity to a cool downtownish area were more reasonable compared to Arlington's.
Any idea as to why this house would be priced this low - usually homes in this part of Vienna go for substantially more, even if they are in the South Lakes district:
http://franklymls.com/FX7236621
No indication that it's a foreclosure or SS.
Mozart..may be sellers are coming back to their senses...:):)
To be honest, I think that one will go quite a bit higher than list price. I know that neighborhood - most likely they needed to sell it quick & needed an auction rather than regular sale.
Mozart: Is it possible they have a mold problem?
"Not so-shadow" inventory after all:
Treasury: No Further HAMP Extensions
From CalculatedRisk:
UPDATE: The trials modification period was originally 3 months, and then was extended to 5 months, and then extended to the end of January. This means that for the borrowers in the trial modification program, there will be no further extensions. For borrowers just entering the trial phase, they will have the normal three month period.
The administration last month gave borrowers who were current on their payments after at least three months an extension until Jan. 31 to provide needed paperwork. But the administration doesn't plan to extend that deadline, Assistant Treasury Secretary Michael Barr said Friday.
"We are going to have further guidance for [mortgage] servicers at the end of the month," he said.
No extension, but "further guidance".
Unless something changes, distressed sales (foreclosures and short sales) should start to increase in February. BofA's estimates the number ...
"of homes being taken back by Bank of America [will] range from 11,000 to 14,000 a month in the early part of this year to 29,000 to 35,000 by November and December, said John Ciresi, vice president and portfolio manager for Bank of America in Towson, Md.
...
The system became "clogged" by a voluntary moratorium on foreclosures while banks met the requirements of President Obama's Making Home Affordable mortgage plan program and by state legislation requiring mediation before banks can start the foreclosure process, Ciresi said ...
Bank of America is getting 40,000 new offers a month on short sales, or homes offered for less than the mortgage balance, Ciresi said."
Here comes the next wave of distressed sales, and based on the BofA estimates, the wave will build all year.
CRT
Made a strong argument that Giving money to the bankers is just like unemployment benefits.
There is a minor difference.
I've paid FUTA and SUTA for 30 years.
the 2 times i've drawn UI, i was drawing against my own premium pool.
The I Banks? Never paid a dime in taxes towards a risk pool.
Actually plain ass refused to, that's why they weren't bank holding companies and FDIC sponsored.
CRT makes Paulsen's argument that crony capitalism is critical.
That banks that were conservative, paid FDIC and maintained reserves should be stripped of their money
because the Goldmanites were important to the system.
CRT makes the crony capitalism argument well, but, it's immoral.
pat,
CRT works for a bank - defense is in order...
Spider-
I don't think either CRT or I work for a bank, and I think both of our companies would have done as well if not better if there was more distress and failures in the banking industry. We just think that letting this happen would have been a huge huge risk to the economy and are glad that the government saved the banks and did not take this risk. e.g. they let Lehman fail and that is all it took for the economy to fall of a cliff.
Pat-
I agree it is not like unemployment insurance. But these companies and their employees pay tons of taxes so the government is much better with these companies healthy and paying taxes rather than dead or dying and not paying taxes.
Mozart said...
"Any idea as to why this house would be priced this low - usually homes in this part of Vienna go for substantially more, even if they are in the South Lakes district:
http://franklymls.com/FX7236621"
Mozart, I showed that one to my wife this past week and the fact that it backs up right to Rt. 7 was a deal killer. Some day 7 will be widened and if you're lucky your view will change from a busy highway to a sound wall. South Lakes HS is also a big negative when you can get homes in Oakton, Vienna, and parts of Great Falls for that same price
MM VA Investor is right by saying not to take out the radiators. That heat is very humid, makes you feel warmer and you use less gas or fuel oil. We put a SpacePak ductless system in a 3 bedroom Arlington house my family owns and rents out about 2 years ago, and the cost was $8,700. B&B in Alexandria did the work and they seem to do a lot of the ductless systems. For Arlington Co. taxes: 2 houses in zip code 22204, land value stayed the same as for 2009 but improvements went down at 1% for one house and 1.5% for another house. For house in 22207, land and improvement stayed the same as 2009. For our condo in zip 22209, land value went up about 1% and improvement went down about 2% from 2009. Also, FHA is doing away with the 90 day flipper waiting period as of Feb. 1. I never got back to someone about the building next to mine which is trying to sell occupied units to investors. Depending on the view, the rent is either $2,100 per month or $2,200 per month for a 1 bedroom with a garage parking space. With depreciation, writing off part of the condo fee for maintenance, you are almost at break even in year 1. The assumption is that rents will continue to increase, so you should be cash flow positive in a few years.
HB Says
"I agree it is not like unemployment insurance. But these companies and their employees pay tons of taxes so the government is much better with these companies healthy and paying taxes rather than dead or dying and not paying taxes."
Yeah, these guys pay tons of taxes.
if you look at goldman sachs annual report they paid $6B in taxes.
Let's see they were responsible for
their share of 14 Trillion in wealth destruction that year.
let me know in the year 3000 if they paid enough taxes to offset this.
Look, the entire school of vulture capitalism these scum bags sold was
"The entire value of a firm is the discounted cash flow of earnings"
and they made people burn old growth forests to the ground, close steel plants and force bankruptcies.
But, when their turn came, they were vitally critical parts of the economy.
This country was best off when these were tiny outfits. letting them grow just made them bigger threats to america.
Pat-
They destroyed a ton of the wealth, but most of it was overinflated bubble wealth anyways. Houses were clearly bubbly. There are always bubbles, so saying they were the reason that the stock market is down 25% from peak is silly.
For Mozart/HayfieldGrad and whoever else cares,
FWIW, here are the stats on who got into TJ by middle school. As you can see there's an obvious correlation between GT Center at the middle school and how many kids are getting into TJ. For the schools with GT Centers I have divided the number of kids going to TJ by total kids in the GT Center (to account for the fact that some MS have ridiculously large GT Centers and some more moderately sized ones.)
Glasgow 9/145 = = 6%
Twain 7/98 = 7%
Sandburg 11/143 = 8%
Lake Braddock 24/254 = 9%
Hughes 20/169 = 12%
Kilmer 55/410 = 13%
Rocky Run 36/275 = 13%
Frost 38/258 = 15%
Longfellow 47/282 = 17%
Carson 61/336 = 18%
I see a pattern. The three GT Centers at the bottom feed to Stuart, Annandale, Edison, Lee, Hayfield, West Potomac, Mount Vernon, and Falls Church (this data predates the creation of the Jackson GT Center.)
Re Lake Braddock -- Robinson MS has a high number for a non-GT Center school. My guess is that a lot of parents figure why send their kids to Lake Braddock MS for two years for a GT Center and then have them go to Robinson for HS if they do not get into TJ.
On this page if you click the link in the second bullet point you can see a video about the then new GT Center at Luther Jackson. Before anyone screams that the lower results for GT Centers at Glasgow or Twain or Sandburg reflect racial biases I would point you to this video which shows how lily white/Asian the GT Center at LJ is. Also, I'm guessing there are few FRL in that group as well.
On a side note, the high schools not listed above excel *even as* TJ takes a disproportionate number of top achieving students away. If TJ did not exist the test score differential between these schools would probably be much larger.
So the point of all of that is I do think kids at the top schools are getting a better education. Now, are the "bottom" schools good enough? You can decide for yourself what you want.
But I'm pretty sure you would find the GT Centers among schools are roughly similar socioeconomic-wise. So I think the different results stem in part that kids are challenged more in the higher performing pyramids. If there is this sort of differential at the GT Center level just imagine what it is for the vast majority of students not in a GT Center.
Classes slow down when kids misbehave. They slow down when 20+% do not speak English as a first language. It affects instruction.
Less controversial comment (perhaps)
Looking over my 401k quarterly statement I see some mutual funds (luckily one I have some but not a lot of money in) had a 74% return this year.
Some investors are making a lot of money this year. And it's not in real estate.
Unfortunately I am not all knowing so I did not know this mutual fund (or one other one offering 77%! that I did not have money in) would do this. Otherwise I would have had put 100% in those two. ;)
And most of the remaining mutual funds had one year returns of 30-50%.
I hope this party continues because that will draw the sheep back to stocks and leave the real estate investing to the small crowd that did it pre-2000 and bring prices back to reality.
HB Says:
"They destroyed a ton of the wealth, but most of it was overinflated bubble wealth"
Is that another excuse for all the RMBS and CMBS fraud?
the RMBS and the desire to hype CDS
and synthetic CDS was the cause of the bubble.
if Wall Street had not hyped up the bubble for cruddy paper, there would have been no bubble
HB, CRT
You both seek to justify wall street
while I see them more as the Vampire squid on the face of humanity.
Volcker said "There has been no worthwhile innovation since the ATM"
Here is a possible win for Ace who predicted McDonnell would do nothing on transportation.
Our new governor has said no time to work on transportation this year.
:(
Let's hope he does not kick the can down the road in 2011, 2012, and 2013 like so many of his predecessors. Of course, part of the problem is the General Assembly cannot agree which way to increase funds (and some rural legislators could care less about the issue since their roads are not jammed.)
TBW,
Yay, I win! Oh wait...all of us lose if the can is kicked.
"The Obama administration's foreclosure prevention program reached about 850,000 homeowners through December, including more than 50,000 in the Washington region, according to Treasury Department data released Friday, but the effort continues to struggle to make a significant impact.
About 1,500 District residents have had mortgage payments lowered under the program, called Making Home Affordable. In Virginia, about 22,000 homeowners have been helped, compared with 28,000 in Maryland. The numbers represent an overall increase in modifications of about 17 percent from the previous month, according to Treasury data.
But only a small portion of borrowers in the program have moved from its trial phase into a permanent loan modification. Overall, roughly 66,000 homeowners, or about 7 percent of the 850,000 enrolled, have received permanent modifications, according to the Treasury data. That includes about 4,200 borrowers in the Washington region. "
so what happens next? Do 40,000 Foreclosures in trial mod move to foreclose?
CRT
Could this have worked?
"And there were alternatives to the bailouts: the government, via the FDIC, could have just taken over the operating concerns, repaired the capital bases and carried on offering services, which would have obviated the need to pay out sums to other banks via credit default swaps, given that the issue of solvency is no longer an issue when the liabilities are fully backstopped by the government."
pat/spider,
Wow, 22,000 Virginians in the DC area have participated in the Making Home Affordable program. That's a huge number. Interesting data from spider as well.
I do not think we will see a wave. But it will be interesting to see if the trajectory on this table changes this year.
Unfortunately for Robert and Va_Investor I think the #1 reason inventory went down was the Making Home Affordable Program. It was also the #2 reason. And the #3 reason. #4 was investors. #5 was the Making Home Affordable Program. #6 was banks just taking a while to deal with foreclosures. #7 was the Making Home Affordable Program.
Have I mentioned that the Making Home Affordable Program has played a large role in reducing inventory? ;)
spider - my guess is it takes a little longer than February for the trajectory to change but I hope you are right. My guess is it takes until summer at the earliest but maybe fall 2010 for the trajectory to change.
If inventory does not start creeping up later this year I will find that very negative news for us bears and it may move up my buying plans. However, I do think the gov't has just delayed the inevitable by a year or so with the Making Home Affordable plan. And no, once again, I'm not predicting a tsunami. Just inventory numbers going up gradually as the foreclosure moratoria and gov't gimmicks end.
"Wow, 22,000 Virginians in the DC area have participated in the Making Home Affordable program. That's a huge number. Interesting data from spider as well."
That is indeed a huge number, if true this suggests there are massive numbers of potential foreclosures still out there that have been delayed or prevented by this program.
To put this in context, according to MRIS's data, there were roughly 19,000 total homes sold in the NVAR region in 2008.
Note that those are the 2008 numbers, the 2009 numbers will show significantly higher sales. That is also only NVAR, and it is possible the WP was including GPAAR and FAAR in the Virginia part of the "Washington region," which would add 1,700 and 3900 additional sales respectively.
The bottom line is that there are roughly as many Virginians in this program as there were sales in all of 2008. (Assuming the WP article wasn't talking about all of Virginia, which would be extremely sloppy considering the wording strongly implies they are talking about the DC area.)
If even a significant minority of these homes go into foreclosure over the next year or two it will be a meaningfully large number.
Note there is still a lot we don't know so don't take this as "Leroy said there was a crushing wave of foreclosures coming..." prediction.
It DOES give us some idea of the scope of the government intervention.
I think it is safe to say we have seen a meaningful number of foreclosures delayed or prevented in 2008 by this program and should any large percentage of these properties land on the market as foreclosures it will be noticeable.
Going back to that original WSJ article that was talking about the trial period ending at the end of January for some program participants...
"Wells Fargo said it expects about half of borrowers who make the required trial payments to ultimately receive a completed modification under the Obama plan. Of those who don't, about half are likely to receive a modification outside the program, said Michael Heid, co-president of Wells Fargo Home Mortgage."
http://tinyurl.com/ykzwtwa
Now that quote is only talking about borrowers who make the required three months of trial payments, but of those, Wells Fargo anticipates 25% will not receive a modification.
This doesn't help a lot though because not receiving a modification doesn't mean they will foreclose, and for that matter some significant percentage of those who do receive a modification will still foreclose.
I also don't know if the 22,000 number for VA counts only borrowers who have successfully made the three months of trial payments.
tbw,
It seems that there is alot of switching between investments. One crashes (ex. Stocks in the late 90's or so) and money runs to another. Same thing here? I'm happy that we didn't bail on stocks and believe I'll be happy with the RE in the long term.
If only I had a crystal ball...
Regarding the mod program and inventory. I'd like to know by zip where these mods are located. Clearly, certain areas need more inventory at this time. If i had to guess, I'd imagine most of these mods (that will fail) are in areas that most here have no interest.
With the price increases in those areas hardest hit, I am not concerned too much. I doubt, given current inventory levels and prices, we will see much carnage.
How many here expect Vienna, Oakton, N. Arl, ect. to be affected in any meaningful way?
Here is a possible win for Ace who predicted McDonnell would do nothing on transportation.
Our new governor has said no time to work on transportation this year.
:(
Let's hope he does not kick the can down the road in 2011, 2012, and 2013 like so many of his predecessors. Of course, part of the problem is the General Assembly cannot agree which way to increase funds (and some rural legislators could care less about the issue since their roads are not jammed.)
Uh, traffic is one of the reasons Vienna/Oakton is so expensive.
Low investment in transportation = higher values in areas close to job centers.
22,000 HAMP participants in NOVA.
That is a lot. What if Obama jams the banks and forces principal reductions? What happens if home values rise in those places? Oh, that's already happening.
Before we go off on the HAMP inventory tsunami, can someone please provide me with an explanation of the last tsunami from the moratorium last Spring. Anything, please. Did the demand monster eat the whole thing and then some? Was it fiction?
Those truly are interesting #s -- esp. if the WaPo is referring only to the DC area with regard to both sales and people helped by the MHA program. It certainly is one factor that helps explain why we've had a lot of difficulty understanding or agreeing about the relationship between inventory, or months of inventory, and housing prices. And taken together with the still low levels of sales in many areas, it really is an indication of how unhealthy at least some parts of the housing market around here remain.
...and it also helps explain why income levels still seem so out-of-synch with housing prices around here.
It boggles my mind, how this nonsensical fed/treasury policies (tax credit, HAMP, MBS purchases) are diverting even more investment dollars into housing when there is a striking need to do exactly the opposite.
All the housing demand that is getting pulled-forward & HAMP/MBS purchase expiry sounds trouble for 2010. Price discovery will find its course. However, washington policies are just delaying the inevitable and likely making it even worse.
Spider et al
The massive government intervention is why I Pegged my BS meter on things.
If we had hit a natural bottom it would have been one thing, but instead we had every stop pulled to keep up prices.
i call that a rotten market, and don't want to play.
much as some "Great" deals now were closed last february, it feels like a ripped paper bag that they are trying to pump air into to keep it inflated.
when it ends it will end badly.
obama would have been far better to let it crash naturally and pick up the pieces then to try and let bernanke reinflate.
but add signal data that massive numbers of properties are sitting empty, and we don't know where it bottoms.
i see lots of empty condos in clarendon and ballston. I see lots of empty condos in DC.
whenever those come out, it will cut demand for TH's and small SFHs.
Robert, there won't be any "forced" principle reductions. Barney Frank was on CNBC a few weeks back and said that he is totally against it. If HE is against it, it would never fly. It would be political suicide anyway.
pity
principal reductions are the only hope to restoring order to the market.
let people file chapter 11, cut the loads if needed, move forward.
The banks have cut interest to a negative number and it's still not helping.
The only choice is to cut principal but that shows up on earnings right now.
spider said:
"All the housing demand getting pulled forward..."
What about the demand that had been on the sidelines since 2003 or 2004?
When I see multiple offers, I see demand. How much was pulled forward and how much was pent-up?
OT,It was smart on the part of HUD to get rid of the 90 day "seasoning" requirement. Driving down Sterling Blvd today vs. two years ago is night and day. Flipper's jumped in there, took on risk, and turned Sterling around. They made money, the end buyers paid half (or less) of peak prices, blight all but disapeared and now we have a higher baseline for comps.
Remember the articles about 2 foot high grass and boarded-up houses? Private enterprise took care of what no gov't could have.
it was stupid to eliminate the seasoning requirement.
all it's done is shift risk onto FHA.
If it's well priced let conventionalo finance carry it.
the point here is now FHA is at risk on 3% down properties.
FHA replaced subprime.
Get a clue pat.
Why do you think no one was going FHA during the boom? UNDERWRITING! FHA apraisals. Condo approval, etc.
How much risk is there at this stage? Low end dropping 40%? Or is that only the areas that haven't corrected yet (but will...if you just wait long enough).
FHA is hardly sub-prime. What, by the way, is the justification of a 90 day wait? Have entire neighborhoods been turned around by flippers or not? Are those renovated homes going for 2005 prices or half of that?
In other words, what the hell is your point?
Pat I have been lurking because I am currently renting my brother's condo at the Hawthorn in Ballston while he is in London. You seem to always refer to lots of empty condos in Clarendon and Ballston. I can't find them. Where are they? I tried to buy a 1 bed condo at Hawthorn in Dec with a 3% off the list price of $385K and was blown out by a full price offer. I ran into the dude who bought it and he said that he gave up afer losing 3 condos in the area to higher bidders. Let me know where those buildings are. I want to get in while the buyer's bribe is still out there.
va_investors:
"FHA is hardly sub-prime."
Famous last words.
http://www.businessweek.com/magazine/content/08_48/b4110036448352.htm?chan=top+news_top+news+index+-+temp_top+story
as for why there is no good reason for the 90 day rule? The mere fact the wolves of wall street desperately want to change that is reason enough to keep it in.
as for 2005 prices? we will see.
http://www.nytimes.com/2009/11/13/business/economy/13fha.html?_r=1&partner=rss&emc=rss
The Federal Housing Administration, the government agency whose loan-insurance programs have become a crucial source of support for the housing market, said on Thursday that its cash reserves had dwindled significantly in the last year as more borrowers defaulted on their mortgages.
Can we use your famous line as an obituary?
"va investor said - What about the demand that had been on the sidelines since 2003 or 2004?"
You must be joking - there was a massive bubble from 2003 until 2006 if you haven't noticed. Not many people could resist to remain on the sidelines then (everyone wanted to get rich in RE). Everyone I know owns the home - and much bigger than what they can afford with their income.
And, if there is that much demand, why was there a need to extend buyer's bribe?
I did a quick survey across major restaurants & small businesses in key areas across NoVA this weekend (not a scientific survey). The response was quite unanimous - customer traffic is terrible & is getting worse (not better).
This isn't over yet - CRE is barely alive & RRE is on life support right now. Be careful out there.
If you own investment RE - sell all you can before government pulls the plug & it is all over.
CB drive wilson towards courthouse
late at night, count dark windows.
"va investor said - What about the demand that had been on the sidelines since 2003 or 2004?"
How can demand build up during a bubble? Obviously during that time people are buying like gangbusters in order to get prices that high. Demand only builds in the stalemate period when a bubble is bursting (like now). And if the number of people being removed from the buying pool due to foreclosures and shorts on their credit keeps increasing, then there won't be enough "pent up demand" to support prices. Maybe in 5-7 years they can buy again and save us from the baby boomer retirement / die off.
pat,
There are many vacant apartments across Vienna & Dunn Loring metro corridor as well. Rental market has to be screwed up from what I see.
Spider-
I live in one of the large buildings right across from the Dunn Loring metro. The rental market in my building is actually surprisingly strong. The building was made in 2006 so basically everyone is 30% underwater, so there are a ton of accidental land lords including my land lord. Seeing that everyone is accidental owners I am really impressed that people tend to have no issue renting the places out within 1-2 weeks on craigslist without using an agent.
The only real sign of weakness is the fact that rents have been flat for the last 2 years rather than going up the usual couple of percent a year.
What makes you think that the rental market is so weak? I so agree there are rentals with no one living in them, but this is always the case. Do you have any evidence that there are more unrented units than usual?
I don't think looking at how many lights are on is a good indicator. Many people in my building rarely have their lights on/ have the blinds closed so you can't see any light coming out. But if you look at the parking lot everyone has assigned spaces and the lot is entirely full implying the people are there.
Wow banks are really looking to get a better public image bank tax
It sounds like even though a lobbying firm is telling them they may be able to get out of paying an additional $100 Billion in taxes that would rather just pay the taxes and get this whole mess behind them.
Also VA I agree with you FHA is not the same as subprime. It is similar to prime people who took 80/20 loans, but the underwriting standards that ensure people have incomes and can make the payments put it in a different class than a lot of the loans from 2006. Sure some of these people will walk away if home prices fall, but at least (unless they lose their jobs) they actually have the ability to make the payments. Which definitely was not the case with a lot of loans that were issued in the bubble years
spider said that everyone he knows already owns and none of them can afford their mortgage.
Wow. Must be a generational thing. I know of no one who can't afford their mortgage (except my housekeeper and she went thru foreclosure 2 yrs ago).
Housebuyer,
Another point regarding the large amount of FHA loans recently; these people are not buying at peak. Many people spend whatever comes in and don't have 20% down but can well afford a house payment. Owning a house can be a form of "forced savings". All we have to do is look at where the majority of net worth comes from.
VA-
I agree that there a lot of people that spend everything, although these people are a bit of a worry for the housing market. This basically means if they lose a job or need a major repair on their house at some point they may lose their house.
Until the last 6 months none of my friends owned a house. Since then 4 have bought that was in the 2-2.5X their income. Based on current interest rates and down payments these people should have absolutely no issue affording their houses. I think spider is a couple of years older than me, so more of his friends may have bought at peak and are also paying a higher interest rate so I could understand if they are struggling.
Housebuyer,
Unless people put off buying until their later 20's or early 30's, I doubt many would have 20% down. I don't know if FHA requires reserves. That really would be the issue, but it doesn't mean they won't go out after closing and buy a new car (been there, done that).
I suppose we could look at the default experience of FHA during the flat years of the 90's. I really don't see the low end going lower at this point. Mid to upper mid-level housing tends to be sold to people with other assets to see them through a hardship.
Obviously, there will be foreclosures. Always have been and always will be.
VA-
I agree with most of your post, except perhaps that people in the middle market have significant other assets. Maybe we are thinking of different middle markets, but I am thinking the 250-500K range. I think a lot of people buying in this range have some savings, but will likely spend them upgrading the house and will be in trouble if they lose their job and it take several months to find a new one.
spider,
There is pent up demand. Last spring, I mined the ACS housing data, assuming I'd find how many more renters bought homes in the bubble. Well.... In Fairfax county anyway, while the ownership percentage may have increased a tad, the shear number of renters who made over $150k in 2007 compared to 1997 scared me. 14,000 extra $150k earning households were renting in 2007 AFTER adjusting for changed in population.
What the data showed was that the bubble pulled in a lot of people who couldn't really afford their purchases. Surprise, surprise. But that extra demand on the sidelines was preferentially at the higher income levels. Which means the demand side is tilted towards SFHs and move-up SFHs, whereas the supply side from foreclosures was preferentially for long commutes or low-entry level housing.
I strongly recommend rechecking the demographic information for yourself. Stop relying on "common wisdom" and dig into the data if you're not afraid to be proven wrong.
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