only the number of housing units sold in 2004/05 will impact the pricing?

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Submitted by nestingcouple on January 25, 2007 - 9:53pm

It seems to me only the number of houses sold in 2004/05 will have a big impact on the future house price since all the people I know who bought in/before 2003 are comfortable with their monthly payment (price was low and they got the historically lowest rate) and are not bothered with the declining pricing (maybe my sampling was too small)

my research could not find the number of houses sold in 04/05/06 and the years before. If indeed the # of housing units sold in 04/05 is relatively small, then even if the sale prices were high, it won't have much pressures on the price. On the other hand, if the # of house units sold in 04/05 were significant larger than other years, then the housing price depreciation is going to be more likely.

Does anyone have the sale history for San Diego (just the units sold, not the median prices...)? To me it'll tell us more than median price graph.

Thanks.

Submitted by sdrealtor on January 25, 2007 - 10:04pm.

I just looked at a house today that the owners bought pre-2000 for under $400,000, owe about $800,000 and will lose their home. What about them?

Submitted by lendingbubbleco... on January 25, 2007 - 10:18pm.

sdrealtor-

niiiiiice! I like your style sometimes (right between the eyes)

Submitted by nestingcouple on January 25, 2007 - 10:21pm.

hi sdrealtor, I was thinking that the percentage of the buyers in 04/05 who would be likely/eventually in trouble in the declining market would be much bigger than the percentage of the buyers bought before 03. What's your opinion on this? Thanks.

Submitted by SD Realtor on January 25, 2007 - 10:44pm.

Actually I read that the majority of the NODs reported were indeed for homes purchased in the last year and not due to resets. This is not to say that people are also losing thier homes due to bumbling refinancing and taking cash out. However there is some merit in your argument nestingcouple.

SD Realtor

Submitted by sdrealtor on January 25, 2007 - 10:52pm.

LBC,
Sometimes I see bullish signs and sometimes I see bearish signs but I just call them as I see them.

NC,
Sure the %age of defaults should be higher in 04 and 05 but lots of buyers during those years will be fine. There are lots more years that will have lower %ages but heck even lower rates of default will have to be considered over purchases over the last 20 years or so due to equity withdrawl. I suspect it will be fairly even among bubble buyers (more early on in the down cycle) and equity pillagers (more later during the down cycle).

SDR

Submitted by bigmoneysalsa on January 25, 2007 - 11:36pm.

nestingcouple,

Your statements don't really make any economic sense at all. What is your argument exactly? Homes go up for sale for all sorts of reasons having nothing to do with foreclosure: new homes, people moving, divorce, death, etc, etc. Yes, there will be a disproportionately large number from 04/05, but they will still be dwarfed by all the older homes on the market for "normal" reasons.

The prices of homes, like those of any other good, are set by marginal demand. The people you know who bought pre-2003 and are comfortable are not in the market and thus will not affect the price.

Over the last few years the marginal buyer has been willing (speculative mania) and able (exotic mortgages) to pay a lot more than made sense, so prices got bid up a lot higher than made sense. As these reasons go away, so too will the unusually high prices. Sure, foreclosures of people who bought during the bubble years will help speed things along by adding inventory, but they are not necessary for the process to happen.

And besides, I think that 04/05/06 were the 3 biggest sales years ever. I am certain 04/05 were disproportionately quite large, at least. So even if what you said made sense then we should expect large declines.

Submitted by nestingcouple on January 25, 2007 - 11:40pm.

Hi bigmoneysalsa, what you said makes lots of sense to me. But many of us in the forum have been watching the NOD/Forecloure trend and discussing the ARM reset effects, isn't the number of sold houses in 04/05 quite meaningful to the number of ARM resetting in this year and the coming years and possiblily future NODs? Won't the reset and NODs speed up or even cause the price decline?

Submitted by bigmoneysalsa on January 25, 2007 - 11:48pm.

IMHO you are absolutely right that the current NOD/Foreclosure trends are important and will help speed the declines. But I don't think it's fair to say that they are "causing" the declines, because the declines would eventually happen (albeit more slowly) even if foreclosures did not trend up higher than normal and sales in 04/05 were not higher than normal.

Submitted by Bugs on January 26, 2007 - 9:11am.

It's not just the people who bought in 2004-2006 who are stressed; it's anyone who has maxed out their financing during that time frame. That's a lot of people by now.

There will be a few people from 2002/2003 who could also lose even if they didn't max out their financing if the prices decline below that point. And that remains a possibility. If you're under water in terms of equity and you lose your job or get a divorce it doesn't matter when you made your purchase.

Submitted by Cow_tipping on January 26, 2007 - 10:55am.

The 04 and later buyers in bubblicious areas are well under water already. The banks will sell them at market rates. Since the funky financing is now out the window, that means they have to reverse to some sorta tangible number like 3-4X salary and a 10% down. Of course there is 3-10 times the number of houses out there than qualified and able people to buy.
That pushes the market to where it will be based on fundamentals. That = 97 prices ??? nope, the high paying jobs of 97 are now in India and China. Where will it stabilise ??? no clue. Lets just say its 97. Those that bought in 98-03 are now under. I'd anticipate them to all throw in the towel en masse. No one expects houses to be worth less than what they paid, not even the ones that bought last week. The fact that they bought in 03 means they are certain its not going to turn them Upside down. When that certainity is shaken, the fallout will be of biblical (very similar to Bubblical) proportions. Which is why I feel like the dude that got an estate for a tulip during the days of the tulip mania and am still going to get screwed. eevryone is going to be screwed. The ones that partied the hardest, will be screwed the most. The ones that stood by the sidelines in the party will just about make through the hang over ... they did breathe fumes of the booze you know.
Cool.
Cow_tipping.

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