churn in housing

User Forum Topic
Submitted by moneymaker on May 7, 2015 - 7:16am

Have heard the average person stays in their home 7 years before moving, what is the average time between refinancing?

Submitted by flu on May 7, 2015 - 7:37am.

For me..when rates fall .50% or more AND if mortgage balance is > $200K

Submitted by AN on May 7, 2015 - 8:45am.

For me, when rates fall .125% or more and I can do so with no cost.

Submitted by The-Shoveler on May 7, 2015 - 8:53am.

Once rates start to go up the time between refinancing could be maybe 15-20 years?

Submitted by flu on May 7, 2015 - 9:09am.

The-Shoveler wrote:
Once rates start to go up the time between refinancing could be maybe 15-20 years?

Once rates start trickling up, I can't think of a reason for me to refinance my primary. Although my outstanding loan amount would be less, and refinancing at a higher rate would only lower my monthly payments at the trade off of restarting another 15 or 30 year loan and paying more at the end of the term. Hopefully if things work out well, I'll be done with this mortgage anyway.

Refinancing a rental for a cashout to buy other things or taking out a new loan to buy another primary, is something different though. That, I guess, would depend on the current market rate for mortgages.

Submitted by The-Shoveler on May 7, 2015 - 9:32am.

The Rates are so low right now that no one will want to refi out of their existing loan (unless they absolutely have too IMO).

I see this also affecting the average time between moves and maybe more people holding onto their primary as a rental if they do.

It is a once in a life time event IMO,

Submitted by flu on May 7, 2015 - 9:45am.

The-Shoveler wrote:
The Rates are so low right now that no one will want to refi out of their existing loan (unless they absolutely have too IMO).

I see this also affecting the average time between moves and maybe more people holding onto their primary as a rental if they do.

It is a once in a life time event IMO,

That's one of the reasons why I'm inclined to think home prices are not going to crater once rates do start to rise if they do rise slowly, provided the rest of the economy doesn't go south. I think the majority of the buyers (at least in the more higher end homes) are probably well financed since loan requirements are still pretty stringent. I don't think we see too many people putting <20% down for more expensive homes. I don't see a mass panic for people to sell when their payments are locked in at a historical low rate. It would be different if the buying pool were weak buyers with questionable finances, but I don't think the majority of buyers are in this category, at least not in the higher end. Things probably will trickle down when rates go up, but that seems like it might be a slow drip down...So for example, I think I'm going to end up keeping my primary and if were to sell, I probably wouldn't need to desperately drastically drop my price in a higher interest environment, since I would most likely just end up keeping it. The payments are so low and/or maybe by that time, I have no payments on this house since I was able to get a 15 year with payments that are lower than what monthly rent rates would be.

Submitted by spdrun on May 7, 2015 - 9:41am.

Or banks will quietly make existing loans assumable, as was done in the 1980s.

Submitted by AN on May 7, 2015 - 10:12am.

I agree with opinion that the buyers in the last few years have been very strong buyers with large amount of down payment. I too don't see price cratering, unless there's another economic collapse.
As for myself, my payment is much less than the rental of the same property. So, there's absolutely no reason for me to sell if I buy another.

Submitted by flu on May 7, 2015 - 10:27am.

I do think home prices in the bay area will correct though once tech goes into decline.

Submitted by bearishgurl on May 7, 2015 - 10:31am.

spdrun wrote:
Or banks will quietly make existing loans assumable, as was done in the 1980s.

spdrun, lenders cannot do anything other than what is already written in the original note, nor can their successors (other lenders down the line who purchased these notes). Virtually zero conventional loans made since about 2002 had any assumability provisions in them.

In the era you are referring to, mortgage loans already had assumability provisions and instructions written into them. Virtually all mortgage loans made in the last 14-15 years have alienation clauses built into them (due on sale/refinance clauses).

If interest rates rose, lenders could begin to OFFER assumable loans again (to keep within their portfolios), but those would be new (purchase-money or refinance) loans. However, I don't see this taking place unless fixed mortgage rates soar past 10%.

And I don't see mortgages with assumability provisions offered except to the most worthy borrowers. It is far easier and less headache for a Big Bank, mortgage bank or servicer to (immediately or within a year or two of origination) sell a mortgage they originated than to keep it in their portfolio.

Submitted by bearishgurl on May 7, 2015 - 10:39am.

My monthly PITI outlay is currently about 68% of what I could get for monthly rent and over half of it is applied to the principle.

Submitted by spdrun on May 7, 2015 - 10:44am.

bearishgurl wrote:
spdrun wrote:
Or banks will quietly make existing loans assumable, as was done in the 1980s.

spdrun, lenders cannot do anything other than what is already written in the original note, nor can their successors (other lenders down the line who purchased these notes). Virtually zero conventional loans made since about 2002 had any assumability provisions in them.

Sure they can. It's called a loan modification. Principal modifications are frowned upon. But any other term is fair game with the consent of the mortgagee.

Submitted by bearishgurl on May 7, 2015 - 10:52am.

flu wrote:
I do think home prices in the bay area will correct though once tech goes into decline.

I saw your thread thread this morning which turned into a "bay area" discussion.

http://piggington.com/damn_these_low_qua...

I see only certain parts of the bay area eventually falling in price but it will NOT be the uber-established, desirable areas such as SF and Palo Alto, Los Altos, Atherton, etc. It will primarily be the areas where the tech "worker bees" bought into since about 2000 or so.

Since the areas listed above have a preponderance or "old money" and all-cash buyers, I just don't see them falling in value because these types of buyers will never be desperate to sell. The worker-bees who are laid off will be desperate to sell.

And SF isn't going to get any cheaper. There is only ONE in the world and its economy is tied to many other industries besides tech. It is also self-contained separate and aside from SM and SC counties.

Submitted by spdrun on May 7, 2015 - 10:56am.

SF will decline, too. Not by 50%. Maybe by 10-20%. That was the pattern, even in established parts of NYC, in during the last housing crash.

I'd suspect the effect would be more pronounced in SF than NYC. Unlike NYC, most of the housing stock in SF isn't co-ops or condos, thus no HOA boards to police what kind of loans people can take.

Submitted by flu on May 7, 2015 - 10:57am.

It's crapshoot what really would happen. My guess as as useful as anyone else's guess. That's why I don't believe in making financial decisions based on extreme viewpoints. As much as we'd like to think we can outsmart the markets, most people can't or at least not for an extended period of time.

I don't know what will really happen in the bay area. It moves in it's own ways, and no longer living there, I wouldn't be able to comment on it.

Submitted by bearishgurl on May 7, 2015 - 10:58am.

spdrun wrote:
bearishgurl wrote:
spdrun wrote:
Or banks will quietly make existing loans assumable, as was done in the 1980s.

spdrun, lenders cannot do anything other than what is already written in the original note, nor can their successors (other lenders down the line who purchased these notes). Virtually zero conventional loans made since about 2002 had any assumability provisions in them.

Sure they can. It's called a loan modification. Principal modifications are frowned upon. But any other term is fair game with the consent of the mortgagee.

What's in it for a lender to do this when their loan will be paid off upon sale? Why would a lender want to keep a 3-4% mortgage on their books when they can make a new 7% and up loan on the open market?

If you're speaking of a "loan modification" to a new buyer in a "short sale," these beleaguered tech workers would have to sacrifice their good credit in order to exit their property in the bay area. Most of them would ostensibly have way too many "assets" to qualify for a short sale. Lenders want and need to be "cashed out" in a short sale, however little that may turn out to be.

Submitted by flu on May 7, 2015 - 10:59am.

I don't even think a 1000 people layoff at qualcomm would impact north county home prices in a meaningful way. Nor would it impact mira mesa.

Submitted by spdrun on May 7, 2015 - 11:01am.

bearishgurl -- Because many buyers wouldn't be able to afford the payments at 7-8%. They can make the 7% loans, but the principal amount will be lower.

Better to keep the loan on their books, paying something, than have to resort to the bureaucracy of a short sale or foreclosure.

Submitted by moneymaker on May 7, 2015 - 11:49am.

VA loans are assumable last I heard, would that make a house more attractive to a VA buyer in the future after rates rise?

Submitted by bearishgurl on May 7, 2015 - 12:09pm.

IMO, there really is no fundamental reason why the residential RE in "close in" (=<45 miles from SF) bay area cities will "crash" for any reason.

Firstly, there are MANY industries up there besides the tech industry which are large employers. Secondly (and most importantly) is that that the close-in bay area cities never had the HUGE amount of new construction in the last 15 years that SD County and Southern OC did. It was never built because much of the open space situated close in was set aside for just that .... permanent use for public recreational enjoyment. Thus, there are very few (a handful) of CFD's close-in and a couple of these CFD's (the largest ones) are primarily commercial (situated within the old Naval Weapons Surface Center in Vallejo).

Because there was very little newer residential tract construction built close in, the close-in SF bay area cities never had entire subdivisions of homeowners who "paid too much" during the "lending spree" of 2004 - 2007 (as did SD Co and So OC).

And any homeowner in the close-in bay area who still owns their property today (after ATM'ing it to death from 2004-2007) has likely more than recovered by now thru appreciation. As we all know, scarcity of housing alone in a particular locale creates stabilization and appreciation in home values.

If any part of the bay area falls in value due to a "tech crash," it will be the areas in which tech worker bees bought into which are a long commute from SV (Parts of Dublin and Livermore, Tracy, Morgan Hill down to Gilroy and Patterson, Modesto and Turlock, etc). These cities could only marginally be considered "close-in" bay area cities (Dublin, Livermore & Morgan Hill) or not at all (Tracy, Patterson, Modesto, Turlock and Gilroy) but some tech workers with jobs in SV may have been stupid enough to buy into them, even given the arduous daily commute to work to/from these locations.

Dublin and Livermore residents still have Lawrence Livermore Labs, a Federal prison (Pleasanton) and a few other big employers out there (incl Big Oil) who pay well. So these cities may not be as hard hit if the tech bubble bursts.

Contra Costa and Marin Counties are essentially immune from any downturns in RE values (as is SF, mentioned above) for a variety of reasons unrelated to the tech industry ... mostly to do with entrenched land-use and zoning laws which will never be repealed. As it should be.

Essentially, what causes falling RE values in CA coastal counties is the proliferation of CFDs which ended up creating 50-250% more housing available in a particular county. Resdiential RE will continue to trend stable to increasing in value in those cities and counties which didn't permit the rampant creation of CFDs.

I haven't even touched upon the proliferation of those (millions?) residing in the close-in bay area cities and SF who "retired in place" in their long-owned home and aren't going anywhere. Just like in SD County, the vast majority of these people bought their current residences in the 60's, 70's and 80's and either have a very small mortgage or none at all. Many "inherited" their homes. So, I don't see any potential "distress" in this demographic of homeowners even if the tech industry falls through the floor. If members of this group decide they want to "retire" in their vacation homes in the wine country or Tahoe, they'll just rent out their current homes in the city for income. This group doesn't need to sell and they would be fools to sell due to their ultra-low tax assessments pursuant to Prop 13.

Submitted by spdrun on May 7, 2015 - 12:15pm.

You speak as if high prices (and normal people being priced out of close-in markets) are a good thing, when in reality, they're just welfare for boomers.

Submitted by bearishgurl on May 7, 2015 - 12:30pm.

I would have loved to buy a cosmetic-fixer ranch home in Saratoga (SC Co) for my last "forever" home. Alas, those fixers are, for the most part, all gone now, and, in any case, I have been forever priced out. It's a jewel of a town where the "mid-century ranch" is well-represented.

If I lived anywhere near Saratoga, I would immediately join the Mountain Winery:

http://www.mountainwinery.com/concerts

...where hundreds of my "brethren" boomers can be found milling about on any summer or fall weekend :)

I absolutely love it up on the peninsula (western portion) ... it takes my breath away!

Submitted by bearishgurl on May 7, 2015 - 12:37pm.

spdrun wrote:
You speak as if high prices (and normal people being priced out of close-in markets) are a good thing, when in reality, they're just welfare for boomers.

It's not the prices, spdrun. It's Props 13, 58 and 193 which are essentially "welfare" for boomers and beyond.

Sadly, I don't have any of those benefits. I'm paying market-rate taxes on my home, as opposed to most of my neighbors. It really galls me.

The CA Legislature still won't touch this body of law ... even at this late date, what with the all the state budget shortfalls combined with CA's unfunded mandates. Our state representatives are deathly afraid of losing the over-55 vote (the group with the highest percentage of voters within their overall numbers).

Submitted by spdrun on May 7, 2015 - 12:41pm.

It's both. Property tax control is actually a good thing since it adds some predictability to the market.

Submitted by The-Shoveler on May 7, 2015 - 1:35pm.

spdrun wrote:
bearishgurl -- Because many buyers wouldn't be able to afford the payments at 7-8%. They can make the 7% loans, but the principal amount will be lower.

Better to keep the loan on their books, paying something, than have to resort to the bureaucracy of a short sale or foreclosure.

So we are on average going to be making the same (pay) amount 10-15 years. good lord people there will be wage inflation.

Submitted by spdrun on May 7, 2015 - 2:27pm.

Unclear. We may end up like Japan in the 1990s, or Spain in the 2000s. 30% youth unemployment. The milennials just mean more/younger unemployed people.

On a more serious note, the recent historical trend doesn't make per capita income doubling in 10-15 years too likely. It came close in 1980-1990, but that period was actually still marked by a downturn in housing. (Look at nominal pricing for some condos that sold in the early 80s, and again in the late 80s to early 90s.)

Anyone who thinks a market as volatile as California's will go uniformly up-up-up is deluding themselves. Median price in San Diego has fluctuated between $350k and $650k since the crash. Guideline for affordability is 3x income. Median income isn't even close to what's required right now.

Submitted by bearishgurl on May 7, 2015 - 2:31pm.

The-Shoveler wrote:
spdrun wrote:
bearishgurl -- Because many buyers wouldn't be able to afford the payments at 7-8%. They can make the 7% loans, but the principal amount will be lower.

Better to keep the loan on their books, paying something, than have to resort to the bureaucracy of a short sale or foreclosure.

So we are on average going to be making the same (pay) amount 10-15 years. good lord people there will be wage inflation.

Maybe, Shoveler. But if the mtg rates go up significantly, the biggest impact for buyers taking out mortgages is that they won't be able to buy newer econoboxes and mcmansions in close-in areas for their first and second homes ... as they are doing today and have been for a decade.

The FTB and STB will have to "settle" for older, smaller homes situated between (gasp!) a hairdresser-heir and an HVAC specialist in SD County's more established areas . . . OR high-tail it out to the IE (Temecula, Murrieta and points beyond) and drive into SD County everyday.

This is what we boomers had to do when we were in the family-forming stage .... except there was NOTHING in the (southern) IE back then (except for ONE gas/fast food pit stop on the Rancho CA Rd exit of I-15, lol). We as young parents were stuck with what was present in SD County at the time, which didn't have the square footage (inside the house) as today's newer construction does. We had to buy it, move in and worry about how to update it later .... room by room.

A more likely scenario if mtg rates go up significantly in the coming years is that SD Gen Y/millenial would-be buyers will have to drastically lower their housing expectations....or take a job in KS City or OKC instead.

1st and 2nd time buyers in CA coastal counties have traditionally always bought their first home in the lower price rungs and that is as it should be. They're only able to buy in the higher price rungs today because of the artificially low mortgage rates.

Submitted by AN on May 7, 2015 - 2:40pm.

bearishgurl wrote:
IMO, there really is no fundamental reason why the residential RE in "close in" (=<45 miles from SF) bay area cities will "crash" for any reason.

Firstly, there are MANY industries up there besides the tech industry which are large employers.

It's not about the amount of industries and jobs but how well does the workers get paid. When you're talking about $1.6M for a crappy 1700 sq-ft tract house in an area with bad schools. I think it starts to get ridiculous. But my crystal ball is broken, so I can't say when it will crash. My gut feeling is that it will. Never say never.

Submitted by spdrun on May 7, 2015 - 2:43pm.

^^^

That's actually higher than pricing in much of NYC (outside of "lower" Manhattan below 100th St and certain very specific parts of Brooklyn), and the Bay Area doesn't have the excuse of density to support that.

Submitted by bearishgurl on May 7, 2015 - 3:35pm.

AN wrote:
bearishgurl wrote:
IMO, there really is no fundamental reason why the residential RE in "close in" (=<45 miles from SF) bay area cities will "crash" for any reason.

Firstly, there are MANY industries up there besides the tech industry which are large employers.

It's not about the amount of industries and jobs but how well does the workers get paid. When you're talking about $1.6M for a crappy 1700 sq-ft tract house in an area with bad schools. I think it starts to get ridiculous. But my crystal ball is broken, so I can't say when it will crash. My gut feeling is that it will. Never say never.

AN, I looked over the "low quality tract home" thread again today and clicked on the links. You and flu were comparing the most expensive homes in the most expensive cities in SV to prices of SD homes situated close to tech jobs. You weren't comparing SV "worker-bee" homes at all! What about that ~1100 sf WW box in MV (or San Bruno/Millbrae) with a one-car garage? SV worker-bees live there! Or that ~1900 sf 1970's era home in Fremont, just across the Dumbarton Bridge? SV worker bees live there also. It's only an extra ~20-30 mins each way to cross the Dumbarton Bridge (assuming the worker lives close to the other side of the bridge). The same is true of the SM bridge and Hayward/San Leandro on the other side. The homes in these East-Bay cities are even cheaper than Fremont homes but tend to be older and smaller (but not as small as the WWII boxes in northern SM County cities). Hayward, in particular, has a LOT to offer by way of public secondary schools, their great extra-curricular programs and CC, as well as a BART stn and CSUEB practically within walking distance (not sure about Elem school quality). San Leandro and Fremont also have BART stations. And the Fremont school district is one of the best in the bay area! If you live in Fremont and work in Santa Clara southward, you can take the Nimitz Fwy around the bottom of the bay to work and back and thus avoid the bridge altogether!

You guys were only posting links to homes where a worker could walk or ride a bike to Google or Apple. You must know that it is wholly unrealistic for a worker from out of the area who accepts a job up there to be able to qualify to buy something in those areas immediately upon accepting employment in SV.

And btw, a very similar property to the ($5.6M?) 100+ year-old Palo Alto estate property (situated right in the middle of town) which you posted on that thread, joking, "As least it has 'character,'" (or something to that effect) was "good enough" for Steve Job's family to be raised in and for all we know, they probably still live there!

You and flu were essentially bantering back and forth about how the 1-5%-ers live in SV. That has nothing to do with the typical SV worker-bee commuting to/from work daily on company-paid shuttles.

It was just laughable to me that you live in MM (of all places) in SD yet you posted that you expect to be paid $300K upwards in SV upon accepting employment there so you can qualify to buy into an area which is far more valuable than MM! If you weren't actually joking here, then your expectations are totally unrealistic and thru the roof, imho.

It isn't about "how much workers are paid" at all. I don't believe local salaries affect housing prices at all in the close-in Bay Area cities. It is all a matter of supply and demand. The reality is that the hundreds of thousands (millions?) of established residents who have resided there for decades have far deeper pockets than you and me.

This population had a lot more exposure to opportunity throughout their lives than did long-time San-Diegans. It is what it is. None of us can fix this now. It is partly due to the "sunshine tax" that we all paid to make SD County our home.

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