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Wednesday, March 17, 2010
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36 comments:
The new inflation data out today continues to show very tame inflation. Producer prices were down 0.6% and core prices were up 0.1%. As long as numbers like this keep coming out and unemployment sucks I just don't see rates moving much.
certainly CPI is facing a major drag
as Housing prices continue declining.
Housing prices are pulling 2 % off of CPI
(Housing/OER is 30% of CPI and OER is falling about 5-6% this year).
now the continued budget deficits and rising structural deficits, will force a higher interest rate.
At some point rates have to rise.
The buyers bribe is dying and the
f&$^os sitting on my offer are
unable to process it.
JFC.....
Do you think there are many offers out there that are contingent on being approved before the 8k deadline? Or at least that will be retracted once the 8k deadline passes? It won't affect my price point, but I could see that helping inventory at the low end just as the credit expires.
Jeremey-
I don't think it will likely be an issue. The way the credit is set up as long as you have your contract by April you don't have to close until June. So maybe there are some short sales out there, but any normal sale should close faster than 2 months. I still see inventory going up slightly and am somewhat optimistic during the next couple of months it will get to better levels. (seeing that I am a buyer better means higher)
So, a quick and critical question for those with knowledge today.
How much are closing costs running around here right now?
Xpovos - I am paying about 11k in closing costs on a 30-yr conventional loan on approx $600k house in Arlington.
I contacted about 5 different lenders and bargained with them on their "lender" fees for several days.
Jewel,
Thanks, that's very helpful. We're looking at putting in an offer on a property (!) and are debating a $10K price reduction request, or closing costs. We think the seller will be more open to the price drop, which we like better too, but I wanted a better feel forhow the finances would work out. Our property is significantly less expensive, so hopefully the costs are partially % based, but even a $10K for $11K trade off is close.
Xpovos,
Good luck!
Negotiate with the lenders as much as you can, they will eliminate alot of the fees they are charging you (ie wire fees, credit report fees, processing fees, etc) It's alot of phone calls, but totally worth it.
I got $10k in closing costs too.
housebuyer said...
The way the credit is set up as long as you have your contract by April you don't have to close until June.
I understand that. I was mainly addressing Pat's comment since he has an offer out there on a short sale and was complaining about it not being processed. With the short sales are they really "under contract" when the owner has accepted the offer or not until the bank has accepted the offer? And what if the bank counters?
I guess what I'm saying is it could pay off to be a second on a short if you don't care about the 8k as much as the person who already has it under contract (like say investors that don't get the 8k anyway).
Jeremy-
Yeah there may be a good number of those.
Xpovos-
Points are directly related to the size of your loan and they are generally over half of the closing costs. Although you can make them more or less by taking a higher or lower interest rate.
Just to crow a bit...
If you listen to Dave Ramsey this weekend that guy from NoVa yelling like crazy that he hit his Dave Ramsey goals will be yours truly.
Been giddy all week and B&B from pinching myself.
We are so not eating beans and rice this weekend.
We may even pop in a few open houses...
:)
Congrats Texas native!
I listen to Dave Ramsey and wish more people would just have common sense with money.
It will be on Sat show?
HB,
Yes, tame inflation will make sure interest rates are low in the short-term.
But, there is an uglier side to that. Deflation or low inflation will not help housing ratios. Any hope people have for correction to happen in nominal term will be dashed...
If we see major deflation - I am afraid we haven't seen the worse yet....
i like the LA's style :)
this is the best low-balling job i've ever seen! to have the guts to go $75K lower than list and closed it is simply incredible. Mark Ries, you're on my speed dial.
Spider-
I agree deflation would be bad and mild inflation with mild inflation it will take a while to get housing in line. Although with the core continually going up 0.1-0.2%/month I am not overly worried about deflation. So it just means people will be underwater for another 5-10 years. Not pretty, but perhaps not the end of the world.
MM-
I wouldn't have considered asking for ~8% off of list as being a super low ball offer. The property had been on the market for a while and yes 75K is a lot of money, but 8% really isn't that much. This graph claims that in 2007 the average sold price during the winter is regularly around that much.
% off list
MM-
These people both got ~300K off which was over 20%
Leesburg
Arlington
Wow is all I can say about this article belongs in debtors prison
Some lady bought a house in 2003 with 0% down refi/HELOCed 88K out and has not paid her mortgage for over three years. She has lived there 7 years and the amount of money she took out of the property is more than all of her mortgage payments combined. So she has paid negative rent for the last 7 years!!!
"Spider said...
But, there is an uglier side to that. Deflation or low inflation will not help housing ratios. Any hope people have for correction to happen in nominal term will be dashed..."
Ooooo! So scary and ominous sounding. Kinda like your prediction for a STAMPEDE of inventory... or this gem:
"spider said...
We have much further to go across northern VA - prices are just way to ultra-inflated given the long terms price trends. Folks who are being lured into getting the tax credit will find themselves jumping in too soon!!
Expect at least 20% or more price correction this coming winter across all counties!!
10/10/09 1:11 PM"
20% down this past winter. How did that one work out???
The Anonymous,
What's your price range? What part of Arlington do you want? I bet we can all find you a few nice places to bid on. Surely you want to buy a place soon so you can get the $8k. You think prices have bottomed in Arlington (even though everything posted in Arlington today shows continued declining prices). If you really are as bullish as you claim what's the hold up. You could easily close in the next few weeks if you really wanted to buy a place. I think you are a closet housing bear. You didn't decide against buying in 2002, 2003, 2004, and 2005 to buy at 2005 prices EIGHT years later.
House on the market less than one day, 5 contracts. Wow.
We're still in the game, but it's going to be tense.
Xpovos,
My understanding was sellers prefer to pay closing costs than sell the house for a lower price. A lot of sellers hold part of their value in the idea their home is worth X. They can rationalize away paying some or all closing costs as part of the costs of doing business just like realtor fees.
That's at least my understanding.
TBW -- why so upset that I am holding someone's feet to the flame? Funny, you dont seem to object when I call Robert out on his overly bullish CS projections -- in fact you seem to encourage it.
This blog was all about holding uberbulls accountable on the way down -- why should it be any different on the way up? Its interesting, when I do go back and look at old post, I seem to notice an increasing number of deleted posts. Usually when you check the cashed versions, you can tell its almost always Contrarian, but increasingly, I am finding alot of your deleted posts too.
Is there something you want to tell us about?
Xpovos-
Good luck with the house! You and I are looking in similar areas at a similar price point; I almost wonder if the fantastic rambler I saw today on Frankly (on Redfin yesterday though, strangely) is the one. Whichever home it is, I hope it all works out for you and your family!
Anon-
I don't really keep track of old pages, but I think TBW deleted posts about schools after that debate was going nowhere. Although its definitely possible other things were deleted.
Anonymous,
Are CS numbers out yet for the season?
- NO.
Did we know on 10/10 if 8k was going to be extended?
-NO.
Do I maintain we visit 155 on CS?
-YES.
I think it is you who always gets upset when someone says anything against the housing. What did you think I said in the following that made you lose you sanity?
"But, there is an uglier side to that. Deflation or low inflation will not help housing ratios. Any hope people have for correction to happen in nominal term will be dashed..."
tbw,
I bet Anonymous purchased already in summary of last year. He just claims he didn't to make him sound like more convincing in his pseudo-robert arguments. Either that or the fact that he waited so long that he just gave up in housing getting to realistic levels.
I meant summary->summer
I again met up with the person living in the single family section of my community who was trying to make it through HAMP. After reading so much about the poor success rate of the HAMP modifications in the news, I was worried that HAMP would not solve her problems. And it hasn't. She has since tried working directly with her own lender. That didn't pan out. She has just paid someone 1600 dollars to help her sort out her finances in a way to help her keep her house. I hope this helps her, but this worries me even more. She says she bought the biggest model, fully upgraded. I think she bought in 2003, within, but not at the height of, the bubble. She also told me that there are two foreclosures on her street not yet on the market, and I know of a short sale. This is on a street of huge (4k-6k sq ft homes) brick front homes built in the early 2000s.
Around the corner from me, a guy lost his job about a year ago. His wife probably works part-time, and they have five children. (Yes, it's true, Loudoun County has one of the nation's highest fertility rates.) Nice family. They lost their townhouse in foreclosure in early February, with the bank refusing to let them do a short sale. They maybe paid in the mid-300s price range in 2004, and the bank sold the house to some investor for about 285k. They begged the investor to let them stay to the end of the school year, but he said he needs to take advantage of the spring market.
The townhouse next to theirs? A short sale, owned by a landlord who bought too many properties during the bubble. The neighborhood has two other TH short sales, plus a third that recently went under contract.
I hear these stories in my own little neighborhood of ~150 townhouses and ~75 single family houses and can't imagine how these problems--not yet manifest on the market that we see through frankly, redfin, or our agent--would not be permeating most of the NoVA market, at least the portion of the market purchased during the bubble. Nor can I imagine that these stories will not be a pervasive force behind the future of our real estate market.
In keeping my ear to the ground in my neighborhood, I have to side with Spider.
I know we (myself included) have somewhat embraced the slow trickle theory about foreclosures. It's entirely possible. And, yes, housing is now more affordable. But if an already lengthy foreclosure process is further extended for homes and THs like those in my neighborhood because of government induced delays, then I wouldn't be at all surprised by another foreclosure wave.
Would-be,
Thanks! No, this is a colonial. Good luck with your hunt, we saw another property today that made a great second choice, and were working hard on a third for a while, but this one takes the cake. I'll post MLS stuff, if you like.
REdealSEEKER,
You seem to live in exactly the type of area that would be facing some reo's at present. The neighborhood was built during peak pricing and easy lending. It seems more upscale than the neighborhoods that have had large foreclosures early on. The low end really had no assets to fall back on.
I would suspect that the vast majority in your neighborhood will be able to ride it out as long as they did not lie on their loan apps. "Tsunami" seems to be going the way of "it's moving in".
Foreclosures will keep a lid on prices for the next few years but I don't expect drops - just flatness.
Anonymous,
Given how many school related posts tbw had to delete along the way, that probably accounts for most or even all of his deleted posts.
Xpovos,
Crossing fingers for you!!! I agree with tbw, usually closing costs is the preferred route for both sellers and buyers. "keeps" the comps high, and since there's no leverage on the closing costs it leaves you with more cash on hand.
The other big way to keep your closing costs lower is to not escrow your taxes and insurance. Yes, this is still money you will have to pay out, but not all upfront, and banks can require you to keep two months ahead or more in tax and insurance escrow.
I'm a big, "hold onto my money as long as I'm legally allowed to," kind of person.
So if you're putting 20% down such that they'll let you do your own insurance and tax escrow, I'd definitely do it.
So my total closing costs were around $7000 for a $400k house. Some things scale, some don't.
We had been going the route of buying in early January and making the first payment on Feb 1, but then switched to March 1 because otherwise we would have had to give up some of the $7000 subsidy we had asked for because the GFE was conservative. Let me tell you, that 1 month with no rent/mortgage when we were paying for moving and stuff was really nice.
Sorry this advice is hopefully all a little late... :)
TN,
Congrats!
So for those of us who don't listen to DR, care to outline what the DR goals are? There's a lot of different possibilities on his site...
"Spider said...I think it is you who always gets upset when someone says anything against the housing."
Its true, and its a pet peeve of mine -- unwarranted, hyperbolic statements -- with little analysis or rationale for why the event will come to pass.
"with all the foreclosures out there, there will be another crippling leg down"
or
"with all the new jobs coming in, housing will soon be soaring again"
Crippling? Soaring? Stampede? Really????
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